May 19, 2022 18:13 GMT
Leading Indicator May Point To Growth Peak
US OUTLOOK/OPINION
The Conference Board's Leading Index for April disappointed, coming in at -0.3% M/M vs a flat reading expected - and prior was revised down to +0.1% from +0.3%.
- As the name implies, the LEI is typically a good indicator of the direction of overall US economic growth, with a modest lead (the Conference Board says it anticipates turning points in the business cycle by 7 months - see chart).
- As such, the flat/negative performance in Mar / Apr bodes ill for growth in mid-year, and for now the March index high of 119.50 remains the high of the current cycle.
- There may be a few reasons to see April's weak reading as an aberration: one of the 10 components that go into the indicator, initial jobless claims, rose in April vs March, but from a 50+-year low up to still-low levels - so not exactly weak.
- That's not to say a higher figure should be expected in May. The S&P 500 component was flat in April on average vs March but equities have dived in May; also, building permits and weak consumer confidence weighed in April and that could easily be repeated going forward.
- Overall, the next couple of months' LEI could and likely will offer further evidence that US economic activity has peaked.
Source: Conference Board
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