Leading Economic Indicators (LEI)

In Depth

The Leading Economic Index (LEI), compiled by The Conference Board, aggregates ten forward-looking components into a single composite designed to predict changes in economic activity five to seven months ahead. The components span financial, labor, manufacturing, and consumer domains: average weekly hours in manufacturing, initial jobless claims, new orders for consumer goods, ISM new orders, new orders for nondefense capital goods, building permits, S&P 500 stock prices, the Leading Credit Index, the interest rate spread (10-year Treasury minus fed funds), and average consumer expectations. When the LEI declines for three or more consecutive months, especially by a cumulative 2% or more, it has historically signaled an approaching recession. Conversely, sustained increases suggest economic expansion ahead. The Conference Board also publishes coincident and lagging indices that confirm whether the economy is currently expanding or contracting. Business leaders use the LEI to adjust capital expenditure plans, hiring timelines, and risk management strategies well before official GDP data confirms a turning point.