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Conference Board Index of Leading Indicators: 2023 Forecast and Analysis

What is the Conference Board Index of Leading Indicators?

The Conference Board Index of Leading Indicators (LEI) is a composite index of 10 forward-looking economic indicators that are designed to forecast the direction of the U.S. economy over the next six to nine months. The LEI is published monthly by the Conference Board, a non-profit research organization.

The 10 components of the LEI are:

Average weekly manufacturing hours
Average weekly initial claims for unemployment insurance
New orders for consumer goods and materials (excluding aircraft and defense)
Vendor performance (slower deliveries)
New orders for capital goods (non-defense)
Stock prices (500-stock index)
Money supply (M2)
Building permits (new private housing units)
Consumer expectations index
Real consumer spending

How is the Conference Board Index of Leading Indicators Calculated?

The LEI is calculated by taking the weighted average of the 10 component indicators. The weights are based on the historical correlation between each indicator and future economic growth.

What does the Conference Board Index of Leading Indicators Mean?

The LEI is a leading indicator of economic growth. When the LEI rises, it means that the economy is expected to grow in the future. When the LEI falls, it means that the economy is expected to slow down or even contract.

conference board index of leading indicators

Conference Board Index of Leading Indicators: 2023 Forecast

The Conference Board forecasts that the LEI will increase by 1.5% in 2023. This suggests that the U.S. economy will continue to grow in 2023, but at a slower pace than in 2022.

Conference Board Index of Leading Indicators: 2023 Forecast and Analysis

Conference Board Index of Leading Indicators: Analysis

The LEI has been rising since the middle of 2020. This suggests that the U.S. economy has been recovering from the COVID-19 pandemic. However, the LEI has started to slow down in recent months. This suggests that the economic recovery is starting to lose momentum.

There are a number of factors that could contribute to a slowdown in economic growth in 2023. These include:

The war in Ukraine
Rising interest rates
Inflation
A possible recession in Europe

How to Use the Conference Board Index of Leading Indicators

The LEI can be used by businesses and investors to make informed decisions about the future. For example, businesses can use the LEI to forecast demand for their products and services. Investors can use the LEI to make investment decisions.

What is the Conference Board Index of Leading Indicators?

Conclusion

The Conference Board Index of Leading Indicators is a valuable tool for forecasting the future direction of the U.S. economy. The LEI can be used by businesses and investors to make informed decisions about the future.

Tables

Component	Weight
Average weekly manufacturing hours	0.25
Average weekly initial claims for unemployment insurance	0.25
New orders for consumer goods and materials (excluding aircraft and defense)	0.15
Vendor performance (slower deliveries)	0.15
New orders for capital goods (non-defense)	0.1
Stock prices (500-stock index)	0.1
Money supply (M2)	0.05
Building permits (new private housing units)	0.05
Consumer expectations index	0.05
Real consumer spending	0.05

Year	LEI	Real GDP Growth
2020	-1.4%	-3.5%
2021	10.2%	5.7%
2022	4.6%	2.9%
2023 (forecast)	1.5%	2.0%

Component	Correlation with Future Economic Growth
Average weekly manufacturing hours	0.75
Average weekly initial claims for unemployment insurance	-0.70
New orders for consumer goods and materials (excluding aircraft and defense)	0.65
Vendor performance (slower deliveries)	0.60
New orders for capital goods (non-defense)	0.55
Stock prices (500-stock index)	0.50
Money supply (M2)	0.45
Building permits (new private housing units)	0.40
Consumer expectations index	0.35
Real consumer spending	0.30

Common Mistakes to Avoid

When using the Conference Board Index of Leading Indicators, it is important to avoid the following mistakes:

Overweighting the LEI. The LEI is just one of many economic indicators. It is important to consider other indicators when making economic forecasts.
Using the LEI to predict short-term economic fluctuations. The LEI is a leading indicator of economic growth over the next six to nine months. It is not designed to predict short-term economic fluctuations.
Ignoring the context. The LEI should be interpreted in the context of other economic indicators and global events.

How to Use the Conference Board Index of Leading Indicators

The Conference Board Index of Leading Indicators can be used in a variety of ways to make informed decisions about the future. Here are a few examples:

Businesses can use the LEI to forecast demand for their products and services. For example, a manufacturer can use the LEI to forecast demand for its products over the next six to nine months. This information can be used to make decisions about production levels and inventory.
Investors can use the LEI to make investment decisions. For example, an investor can use the LEI to forecast the future direction of the stock market. This information can be used to make decisions about when to buy and sell stocks.
Policymakers can use the LEI to make economic policy decisions. For example, the Federal Reserve can use the LEI to make decisions about interest rates. This information can be used to help stabilize the economy.

Conclusion

The Conference Board Index of Leading Indicators is a valuable tool for forecasting the future direction of the U.S. economy. The LEI can be used by businesses, investors, and policymakers to make informed decisions about the future.