What Is the Leading Economic Index?
The Leading Economic Index (LEI), published by The Conference Board, is a composite measure designed to signal turning points in the business cycle. It combines ten forward‑looking economic indicators that tend to move before the broader economy, making it one of the most widely watched recession‑forecasting tools.
The index includes components such as manufacturing orders, building permits, unemployment claims, credit conditions, consumer expectations, and financial market indicators.
Why the LEI Matters
- Predicts economic turning points LEI typically declines months before recessions and rises ahead of recoveries.
- Combines multiple indicators Its composite structure smooths out noise from individual data series.
- Used by analysts, policymakers, and investors A sustained decline is often interpreted as a warning signal for slower growth.
- Complements coincident and lagging indexes Together, they provide a full view of the economic cycle.
Key Insights
- Persistent declines in LEI often precede downturns.
- Sharp drops can reflect tightening credit, weakening demand, or rising unemployment claims.
- LEI is more reliable when multiple components move in the same direction.
- The index is updated monthly and can shift quickly during volatile periods.
Source
The Conference Board / FRED