Explanation Guide

Economic Chart Watch

LEI, CEI, AND LAGGING INDEX

The Conference Board's Leading Economic Index (LEI), Coincident Economic Index (CEI), and Lagging Economic Index (Lag) are composite averages of individual economic indicators designed to capture turning points in aggregate economic activity better than any individual component.  Historically, turning points in the LEI have preceded those in the aggregate economy, while turning points in the Lag have occurred after those in the aggregate economy.  The ratio of CEI to Lag, the Co/Lag, is an alternative leading index. The indexes are released around the 20^th of each month with data for the previous month.

Leading Economic Index components:

1. Average weekly hours - manufacturing
2. Average weekly initial jobless claims
3. Manufacturers' new orders - consumer goods and materials
4. ISM New Orders Index
5. Manufacturers' new orders - nondefense capital goods ex aircraft
6. Building permits - new private housing units
7. Stock prices - S&P 500
8. Leading Credit Index
9. Interest rate spreads - 10Y Treasury bonds less federal funds
10. Average consumer expectations for business and economic conditions

Coincident Economic Index components:

1. Employees on nonagricultural payrolls
2. Personal income less transfer payments
3. Industrial production
4. Manufacturing and trade sales

Lagging Economic Index components:

1. Average duration of unemployment
2. Inventories to sales ratio - manufacturing and trade
3. Labor costs per unit of output - manufacturing
4. Average prime rate
5. Commercial and industrial loans
6. Consumer installment credit to personal income ratio
7. Consumer price index for services

The NDR Composite Leading Index is an equal-weighted average of the LEI and Co/Lag.  It reduces some of the emphasis on monetary variables which could skew the LEI, particularly in times of large and extensive quantitative easing, as in the aftermath of the 2008-2009 recession and financial crisis.  It shows a leading tendency to real equipment and software spending growth and corporate profits growth.

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