U.S. Leading Index

On Friday, the Conference Board published the December 2007 numbers for the U.S. Leading Index, which is released monthly.

The Leading Index decreased 0.2%. Paul L. Kasriel, Senior Vice President & Director of Economic Research for The Northern Trust Company, wrote a good article on the Leading Index and furnished this chart.



The index is made up of 10 components. 2 of the components can be updated daily:

• The S&P 500


• The interest rate spread of the 10-year Treasury bonds less federal funds.

3 of the components are released weekly:

• “Average weekly hours, manufacturing”


• “Average weekly initial claims for unemployment insurance”


• Money supply, M2

The rest of the 5 factors are released monthly.

• “Vendor performance, slower deliveries diffusion index” is released at the beginning of the month.


• “Index of consumer expectations” is released at the end of the previous month.


• “Building permits, new private housing units” is released right before the Leading Index comes out.


• “Manufacturers' new orders, consumer goods and materials” is estimated using statistical imputation.


• “Manufacturers' new orders, nondefense capital goods” is estimated using statistical imputation.

The Leading index does not carry too much weight with the stock market. A large part is due to the fact that most of the components are know ahead of time. The release of the index is old news when it hits. The Conference Board also heavily revises the weights to better forecast the business cycle.

This is not to say that the index or the components are not important indicators (just not breaking news).

Here are charts on 4 of the components that can be determined daily or weekly. You can click on them for a larger view.

The employment related charts mirror the official recession dates as declared by the NBER. The M2 and Interest spreads move a bit more independently and sometimes truely lead the recessions.

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