U.S. Leading Economic Index Edges Up in February, the First M/M Increase in Two Years

The U.S. Leading Economic Index (LEI) unexpectedly ticked up 0.1% m/m in February, the first monthly gain since February 2022, following unrevised decreases of 0.4% in January and 0.2% in December, according to a report released today by The Conference Board. A 0.2% m/m February decline had been expected in the Action Economics Forecast Survey. The February LEI at 102.8 was 13.3% below its record high of 118.6 in December 2021. The year-on-year rate of decline was at -6.3% in February, less severe than -7.0% in January and also -7.0% in February 2023.

Over the six-month period between August 2023 and February 2024, the LEI had fallen 2.6%, an improvement from its 3.8% decrease over the prior six months (February 2023 to August 2023). The economy seems to be resilient despite pressures from sticky inflation and high interest rates. Despite the February LEI m/m increase, The Conference Board stressed that the LEI still indicated “some headwinds to growth going forward,” thus forecasting “annualized US GDP growth to slow over the Q2 to Q3 2024 period, as rising consumer debt and elevated interest rates weigh on consumer spending.”

Seven of the LEI's ten indicators in February contributed positively to the index change. These included average weekly hours in manufacturing (0.18ppt), the S&P 500 index of stock prices (0.17ppt), the leading credit index (0.08ppt), building permits for new private housing units (0.06ppt), manufacturers’ new orders for nondefense capital goods excluding aircraft orders (0.03ppt), initial claims for unemployment insurance (0.01ppt), and manufacturers’ new orders for consumer goods & materials (0.01ppt). Meanwhile, the spread between the 10-Treasury note & the Fed funds rate (-0.14ppt), the ISM new orders index (-0.13ppt), and average consumer expectations for business/economic conditions (-0.09ppt) contributed negatively.

The Coincident Economic Index (CEI) rose 0.2% m/m (1.9% y/y) to 112.3 in February after increases of 0.1% in January (+0.2% initially) and 0.3% in December (+0.2% previously). The CEI m/m reading was the fourth consecutive monthly gain and the seventh in eight months. All four of the CEI’s components made positive contributions to the February m/m rise. They were personal income less transfer payments (0.08ppt), payroll employment (0.06ppt), manufacturing & trade sales (0.03ppt), and industrial production (0.02ppt).

The Lagging Economic Index (LAG) increased 0.3% m/m (0.8% y/y) to 118.8 in February following a 0.3% rise in January (+0.4% initially) and a 0.5% drop in December (-0.4% previously). The February m/m increase was the fourth in five months. Four of the LAG's seven components made positive contributions to the index change including commercial & industrial loans outstanding (0.09ppt), the change in the services CPI (0.05ppt), the consumer installment credit-to-income ratio (0.03ppt), and the manufacturing & trade inventory-to-sales ratio (0.02ppt). Meanwhile, the average duration of unemployment (-0.01ppt) and the change in factory sector unit labor costs (-0.01ppt) contributed negatively. The average prime rate charged by banks was unchanged.

The ratio of the CEI to the LAG, also viewed as a leading indicator, fell 0.2% m/m (+1.1% y/y) to 94.5 in February following a 0.2% decline in January and a 0.7% increase in December. The February ratio was the lowest since November. While having begun to exhibit a slight uptrend from a low of 93.1 in December 2022, the ratio remained below its March 2021 high of 101.0.

The Conference Board figures are available in Haver's BCI database; the components are available there, and most are also in USECON. The expectations are in the AS1REPNA database. Visit the Conference Board's website for coverage of leading indicator series from around the world.