The Economy

Conference Board’s Leading Economic Index Fell 0.2% in May

'Volatility in financial markets and a moderating outlook in labor markets could pose downside risks to growth,' said a CB director.
Katie Kuehner-HebertJune 23, 2016

The U.S. economy is showing signs of resilience, but the numbers still point to slow growth with meaningful downside risks, according to new data from the Conference Board released Thursday.

The board’s Leading Economic Index for the United States declined 0.2% in May to 123.7, following a 0.6% increase in April and a 0.1% increase in March.

While May’s decline is primarily due to a sharp increase in initial claims for unemployment insurance, the index’s growth has moderated over the past year, Ataman Ozyildirim, director of business cycles and growth research, said in a press release.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

Download our 2022 survey report for a high-level view of finance team projections and strategies, directly from our CFO.com executive readers.

“While the LEI suggests the economy will continue growing at a moderate pace in the near term, volatility in financial markets and a moderating outlook in labor markets could pose downside risks to growth,” Ozyildirim said.

The 10 components of the index for the United States include average weekly hours, manufacturing;
 average weekly initial claims for unemployment insurance; manufacturers’ new orders, consumer goods and materials;
 ISM 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;
 interest rate spread; 10-year Treasury bonds less federal funds; and 
average consumer expectations for business conditions.

Six of the ten indicators that make up The Conference Board LEI for the United States increased in May. The positive contributors — beginning with the largest positive contributor – were the interest rate spread, the Leading Credit Index™ (inverted), manufacturers’ new orders for nondefense capital goods excluding aircraft, building permits, manufacturers’ new orders for consumer goods and materials, and the ISM® new orders index.

The negative contributors – beginning with the largest negative contributor – were average weekly initial claims for unemployment insurance (inverted), stock prices, and average consumer expectations for business conditions. Average weekly manufacturing hours held steady in May.

Pantheon Macroeconomics’ chief economist Ian Shepherdson told The Wall Street Journal that the index is pointing to second-quarter growth of about 1%.

But the LEI “hugely overweights the importance of the manufacturing sector, which is much weaker than the services sector,” said Shepherdson, who forecasts at least 3% output growth for the June quarter.

4 Powerful Communication Strategies for Your Next Board Meeting