Leading Economic Index

LEIConference Board Leading Indicatorsleading indicators

The Leading Economic Index is a composite of 10 economic indicators designed to predict future economic activity, published monthly by the Conference Board.

Current Macro RegimeSTAGFLATION→ STABLE

The macro regime is STAGFLATION STABLE — growth decelerating (GDPNow 1.3%, consumer sentiment 56.6, housing deeply contractionary) while inflation is sticky-to-rising (Cleveland Fed CPI Nowcast 5.28%, PCE Nowcast 4.58%, GSCPI elevated). The bear steepening yield curve (30Y +10bp, 10Y +7bp 1M) with r…

Analysis from Apr 18, 2026

What Is the Leading Economic Index?

The Leading Economic Index (LEI) is a composite indicator published monthly by the Conference Board that combines 10 economic data series selected for their tendency to predict future economic activity. The index is designed to anticipate turning points in the business cycle, signaling when the economy is approaching a recession or recovery.

The LEI is one of three composite indexes published by the Conference Board. The others are the Coincident Economic Index (measuring current conditions) and the Lagging Economic Index (confirming trends).

Why It Matters for Markets

The LEI's value lies in its ability to synthesize diverse economic signals into a single directional indicator. By combining financial market data (stock prices, credit conditions, yield curve) with real economic data (manufacturing hours, building permits, unemployment claims), it provides a broad-based assessment of the economic outlook.

Persistent declines in the LEI are taken seriously by markets and policymakers. When the index drops for several consecutive months, it raises recession probability and can influence Fed policy expectations, risk appetite, and asset allocation decisions. Conversely, sustained improvement signals that economic conditions are strengthening.

The LEI's recession warnings have been well-publicized, giving the indicator significant influence on market sentiment. Even if the signal proves premature (as in 2022-2023), the narrative impact of a declining LEI can affect investor behavior and corporate planning.

Limitations and Context

The LEI is a useful but imperfect tool. Its manufacturing-heavy composition may overweight one sector of the economy. The yield curve component can generate prolonged negative signals during Fed tightening cycles without a recession following. The stock market component can reflect sentiment rather than fundamental economic direction.

The 2022-2023 episode, when the LEI declined for nearly two years without a recession, prompted the Conference Board to revise the index methodology. This episode highlighted the importance of using the LEI as one input in a broader analytical framework rather than as a standalone recession predictor. Cross-referencing the LEI with labor market data, financial conditions indices, and sectoral indicators provides a more reliable assessment.

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Frequently Asked Questions

▶What are the 10 components of the Leading Economic Index?

The LEI combines 10 indicators: average weekly hours in manufacturing; average weekly initial unemployment claims (inverted); manufacturers' new orders for consumer goods; ISM new orders index; manufacturers' new orders for non-defense capital goods excluding aircraft; building permits for new private housing; S&P 500 stock index; Leading Credit Index (a composite of credit market conditions); interest rate spread (10-year Treasury minus fed funds rate); and average consumer expectations for business conditions. Each component is weighted to maximize the index's predictive power for economic turning points.

▶Can the LEI predict recessions?

The LEI has a reasonable but imperfect track record of predicting recessions. A common rule of thumb is that three or more consecutive monthly declines in the LEI signal a recession within the next few quarters. The LEI has provided advance warning before every recession since its creation, though it has also generated false signals. The 2022-2023 period was notable because the LEI declined for 22 consecutive months without a recession materializing, partly because the index's components are weighted toward manufacturing and interest rates, which were under stress, while the service sector and labor market remained strong.

▶How far ahead does the LEI forecast?

The LEI is designed to anticipate economic turning points 7 to 12 months in advance. However, the lead time varies across cycles and is not perfectly consistent. In some cases, the LEI has signaled downturns a full year before recession onset, while in others the warning came just a few months ahead. The index is better at signaling the direction of change (expansion vs. contraction) than the timing. Analysts use the LEI as one input among many rather than as a definitive timing tool, combining it with other leading indicators and real-time data for a more complete picture.

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