econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 24 February 2015

February 2015 Leading Economic Index Growth Forecast Slows

Written by Steven Hansen

The Conference Board Leading Economic Index (LEI) for the U.S. declined after its surge last month - but remains in the growth channel seen over the past year.

This index is designed to forecast the economy six months in advance. The market expected this index's level at 95.0 to 109.0 (consensus 99.1) versus the 96.4 reported.

ECRI's Weekly Leading Index (WLI) continues to forecast economic weakness over the next six months.

Additional comments from the economists at The Conference Board add context to the index's behavior.

The Conference Board Consumer Confidence Index®, which had increased in January, declined in February. The Index now stands at 96.4 (1985=100), down from 103.8 in January. The Present Situation Index decreased to 110.2 from 113.9, while the Expectations Index declined to 87.2 from 97.0 in January.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was February 12.

According to Lynn Franco, Director of Economic Indicators at The Conference Board: "After a large gain in January, consumer confidence retreated in February, but still remains at pre-recession levels (September 2007, Index, 99.5). Consumers' assessment of current conditions remained positive, but short-term expectations declined. While the number of consumers expecting conditions to deteriorate was virtually unchanged, fewer consumers expect conditions to improve, prompting a less upbeat outlook. Despite this month's decline, consumers remain confident that the economy will continue to expand at the current pace in the months ahead."

Consumers' appraisal of current conditions was moderately less favorable in February than in January. Those saying business conditions are "good" decreased from 28.2 percent to 26.0 percent, however those claiming business conditions are "bad" decreased from 17.3 percent to 17.0 percent. Consumers were also somewhat less positive in their assessment of the job market, with the proportion stating jobs are "plentiful" decreasing slightly from 20.7 percent to 20.5 percent, and those claiming jobs are "hard to get" increasing from 24.6 percent to 26.2 percent.

Consumers' optimism about the short-term outlook was considerably less positive in February. Those expecting business conditions to improve over the next six months decreased from 18.9 percent to 16.1 percent, while those expecting business conditions to worsen increased from 8.2 percent to 8.7 percent.

Consumers' outlook for the labor market was also less optimistic. Those anticipating more jobs in the months ahead decreased from 17.3 percent to 13.4 percent. However, those anticipating fewer jobs declined from 14.8 percent to 14.3 percent. The proportion of consumers expecting growth in their incomes declined from 19.5 percent to 15.1 percent. The proportion expecting a decrease rose from 10.8 percent to 12.0 percent.

The LEI which shows the index - as well as showing some turbulence in the indicator's post recession climb:

z conference1.png

LEI as an Economic Monitoring Tool:

The usefulness of the LEI is not in the headline graphics but by examining its trend behavior. Econintersect contributor Doug Short (Advisor Perspectives / dshort.com) produces two trend graphics. The first one shows the year-over-year growth, as well as the three month rolling average of the rate of change - shown against the NBER recessions.

For a better view of the current conditions, the above chart is zoomed below to better show the current timeframe.

As an analyst, I keep my eyes on 3 month rate-of-change (red bars). There is a short term (half year) trend along the zero line. Any recession warning follows months of negative growth of this index. This is why the authors of this index are saying no recession is near.

The methodology for this index was "improved" in December 2011.

As a comparison to the LEI, ECRI's WLI (which Econintersect reports on weekly) remains in contraction territory.

Current ECRI WLI Index

Econintersect believes the USA economy continues to be weakly expanding at Main Street level, but the growth rate has been relatively flat (no acceleration or deceleration) for the last half year (analysis here).

Caveats on the Use of the Leading Economic Index (LEI)

This index is produced by The Conference Board (a private money making company) - who charges for the details of the indices they publish - although the summary of this index is available to the public. Its designed to predict economic growth over the next six months.

This is not a "black box" economic forecasting index as The Conference Board publishes the components. It was completely revised with the release of the December 2011 (analysis comparing the old and new index components - click here). The new components of the index and multipliers:

The index does not adjust for inflation or population growth, is not final for several months after being published, and is subject to annual revision. The methodology in producing this index:

1) normalized levels of the indicator rather than its monthly changes will be used to calculate the component contributions of components based on diffusion indexes such as the ISM New Orders Index; 2) when component data are missing, autoregressions in log differences instead of levels will be used to calculate the statistical imputation of the missing months; 3) trend adjustment will be done in two periods: 1959-1983 and 1984-2010 (same as the volatility adjustment); and 4) LCI contributions to the LEI are calculated from its levels (not monthly changes) and it is inverted As a result of these changes, the history of the revised indexes and their month-over-month changes will no longer be directly comparable to those issued prior to the comprehensive benchmark revision. Based on its performance since 1990, and especially before and during the 2008-2009 recession, the new LEI should provide more accurate predictions of business cycle peaks and troughs.

Econintersect has published correlations of the new LEI to past recessions. At first glance this index provides recession warning.

The fly-in-the-ointment is that this analysis is that the above graph is not a real time analysis. Consider that the LEI is not final when first issued - it is subject to revision for months. From The Conference Board:

To address the problem of lags in available data, those leading, coincident and lagging indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each unavailable component. The resulting indexes are therefore constructed using real and estimated data, and will be revised as the unavailable data during the time of publication become available. Such revisions are part of the monthly data revisions, now a regular part of the U.S. Business Cycle Indicators program.

The data does not exist to establish what The Conference Board's LEI values would have been in real time - at this point only the final numbers are known. Unfortunately, knowing the current values is no assurance that a recession is or is not imminent as there is no track record of real time performance.

Old Analysis Blog

New Analysis Blog

All Posts on Leading Economic Indicator All Posts on Leading Economic Indicator
All Posts on Economic Forecasts All Posts on Economic Forecasts


>>>>> Scroll down to view and make comments <<<<<<



Permanent link to most recent post on this topic

Click here for Historical Releases Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.







Econintersect Economic Releases


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Problem With Obamacare Is That It Did Little To Reduce Overall Healthcare Spending
Joan Robinson’s Critique of Marginal Utility Theory
News Blog
Early Headlines: Russia Hacked GOP, Trump To Drain Energy 'Swamp'?, New Sec'y Of State Candidate, India IP Shrinks, India Has World's New Largest Solar Plant , China GDP Hides Volatility And More
Most Coup Attempts In Recent Years Have Failed
The Global Cost Of Diabetes
The Universities Churning Out The Most Billionaires
Five Amazing Ways Plants Have Created New Technologies
Where U.S. Weekly Wages Go The Furthest
What We Read Today 09 December 2016
How To Stop Using Filler Words Like Um And Uh
02 December 2016: ECRI's WLI Growth Index Improvement Continues
Preliminary December 2016 Michigan Consumer Sentiment Highest Since Early 2015
October 2016 Wholesale Sales Improved
Rail Week Ending 03 December 2016: Finally A Positive Month
November 2016 CBO Monthly Budget Review: Total Receipts Up by 1 Percent in the First Two Months of Fiscal Year 2017
Investing Blog
The New Art Of Utility Investing
Investing,com Weekly Wrap-up 09 December 2016
Opinion Blog
Trickle-down Economics, Trump Edition
Looking At Everything: Trump's $1 Trillion Infrastructure Plan
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
09Dec2016 Market Close: Wall Street Closes On A New High, Trump Sugar High, Crude Prices Testing Resistance, US Dollar Melts Higher
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved