WHAT IS CB Leading Index
The Conference Board Leading Economic Index, also known as the CB Leading Index, is an economic indicator calculated by The Conference Board, and used to forecast future economic activity for the United States.
BREAKING DOWN CB Leading Index
The CB Leading Index is a composite average of ten leading indicators in the US.
It one of the key elements in the Conference Board's analytic system, which is designed to signal peaks and troughs in the business cycle. The CB Leading Index is also sometimes known as the leading economic index (LEI).
Components of the CB Leading Index include average weekly manufacturing hours, average weekly initial claims for unemployment insurance, manufacturers' new orders for consumer goods and non-defense capital goods, building permits and stock prices. Other components are indexes of supplier deliveries and consumer expectations, M2 money supply and the interest rate spread between 10-year Treasury bonds and federal funds.
Since the CB Leading Index is an average, it smooths out some of the volatility of individual components, thereby revealing turning points in the economic data more convincingly than any individual component. Historically, the indicators which comprise the CB Leading Index turn downward before a recession and upward prior to an expansion. The single index value composed from these ten variables has generally proven capable of predicting recessions over the past 50 years, but has also been known to falsely predict recessions which did not occur.
The Conference Board
The Conference Board, Inc. is a non-profit, non-governmental business membership and research group organization, comprised of approximately 1,200 public and private member organizations from 60 countries. In addition to publishing widely tracked economic indicators including the CB Leading Index and the U.S. Consumer Confidence Index, The Conference Board conducts economic and business management research and convenes conferences and peer-learning groups.
The Components of the CB Leading Index
The CB Leading Index is comprised of these ten indicators:
- The United States Department of Labor’s monthly report on the unemployment rate, including average hourly earnings and the average workweek hours from the Employment Situation report.
- The United States Department of Labor’s weekly report on first-time claims for state unemployment insurance.
- The United States Census Bureau’s monthly consumer goods and materials report from the Preliminary Report on Manufacturers' Shipments, Inventories, and Orders.
- The United States Census Bureau’s monthly non-defense capital goods report from the Preliminary Report on Manufacturers' Shipments, Inventories, and Orders.
- The United States Census Bureau’s monthly report on building permits from the Housing Starts and Building Permits report.
- The difference between the interest rates of 10-year United States Treasury notes and the federal funds rate.
- The Federal Reserve's inflation-adjusted measure of the M2 money supply.
- The Institute for Supply Management’s monthly ISM Index of Manufacturing including: supplier deliveries, imports, production, inventories, new orders, new export orders, order backlogs, prices and employment.
- The S&P 500.
- The University of Michigan Consumer Sentiment Index's consumer expectations.