7 Warning Signs of a Looming Recession


The Big Picture Gets Blurry

LEI score
The Conference Board's Leading Economic Index (LEI) is a collection of 10 key economic indicators bundled into one convenient score. Conference Board

Most of the indicators we've cited are individual numbers looking a single aspect of the U.S. economy like unemployment or inflation. While all of those figures are loosely interrelated, sometimes it's helpful to take a step back and look at the big economic picture. One of the best measurements of overall economic health is the Conference Board's Leading Economic Index (LEI), a collection of 10 key economic indicators bundled into one convenient score.

The composite LEI score is called a "leading" economic index because it's composed of economic indicators that are supposed to lead or precede future developments. You'll recognize some of the 10 indicators tracked by the LEI, like stock prices and new building permits, but there are also some new ones. Here's the full list:

  • Average weekly hours, manufacturing
  • Average weekly initial claims for unemployment insurance
  • Manufacturers' new orders, consumer goods and materials
  • Institute for Supply Management Index of New Orders
  • Manufacturers' new orders, nondefense capital goods excluding aircraft orders
  • Building permits, new private housing units
  • Stock prices, 500 common stocks
  • Leading Credit Index, a composite of financial indicators related to credit and lending
  • Interest rate spread, 10-year Treasury bonds less federal funds
  • Average consumer expectations for business conditions

When the economic future looks bright, manufacturing orders grow, unemployment claims stay low and consumer confidence soars. That sunny outlook is reflected in a steadily increasing LEI score. But sometimes the opposite is true. Investment adviser Wes Moss says that when LEI growth slows to zero, "you have a recession right around the corner."

Last editorial update on Aug 15, 2019 02:48:09 pm.