LEI Suggests Growth Solid But Past The Peak

July's Leading Economic Index beat expectations (0.9% M/M vs 0.5% prior, 0.7% survey).It was a decent outturn led by ISM and financial conditions components, and the slight pickup from June suggests that the economy maintains some momentum going into 3Q.

• The LEI is more of a coincident than a true 'leading' indicator for GDP, but it does provide a monthly insight into quarterly inflection points in the economy at peaks and troughs (and can lead them by 2-3 months).
• The Y/Y reading has clearly peaked though following easy comparisons from pandemic-hit 2020, and that should translate into slower GDP growth in 3Q.
• Looking ahead, August's figure could be impacted by the Delta variant hitting confidence. Wells Fargo notes "consumer expectations boosted July's LEI by 0.10 points, but early reads for August suggest sentiment may have soured in the face of renewed case growth and higher inflation. That said, the LEI uses an average of the University of Michigan consumer sentiment survey, which slipped in August, and the Conference Board's consumer confidence index, which was at a post-pandemic high in July.

Source: Conference Board, BEA, BBG, MNI