What Is the Composite Index of Leading Indicators?
The Composite Index of Leading Indicators, otherwise known as the Leading Economic Index (LEI), is an index published monthly by The Conference Board. It is used to predict the direction of global economic movements in future months. The index is composed of 10 economic components whose changes tend to precede changes in the overall economy. The Conference Board, founded in 1916, is an independent research association that provides its member organizations with economic and financial information.
Understanding Composite Index of Leading Indicators
The 10 components of the Composite Index of Leading Indicators are:
1. The average weekly hours worked by manufacturing workers.
2. The average number of initial applications for unemployment insurance.
3. The amount of manufacturers' new orders for consumer goods and materials.
4. The speed of delivery of new merchandise to vendors from suppliers.
5. The number of new orders for capital goods unrelated to defense.
6. The number of new building permits for residential buildings.
7. The S&P 500 stock index.
8. The inflation-adjusted monetary supply (M2).
9. The spread between long and short interest rates.
10. Consumer sentiment.
The Composite Index of Leading Indicators is a number used by many economic participants to predict what will happen with the economy in the near future. By analyzing the index in relation to the business cycle and general economic conditions, investors and businesses develop expectations for the future economic environment and can make better-informed decisions.
Global Leading Economic Index Data
As of January 2018, the United States had an LEI of 108.1, which was an increase of 1.0 percent following a 0.6 percent increase in December, and a 0.4 percent increase in November. In comparison, Australia's LEI was 104.6, Brazil's LEI was 116.5, China's LEI was 123.9, France's LEI was 102.8, Germany's LEI was 102.6, India's LEI was 109.9, Japan's LEI was 99.8, South Korea's LEI was 103.5, Mexico's LEI was 104.7, Spain's LEI was 101.5, and the United Kingdom's LEI was 98.1, according to the latest figures. These values are calculated using 2016 as the base year.
Overview of the Conference Board
The Conference Board is composed of a board of chairmen and trustees and its voting members. It has a similar structure as a private corporation; however, no one has any ownership stake in the Conference Board because it is a nonprofit corporation. In 2018, these positions were filled by many high-ranking executives from corporations including Deutsche Bank, BBVA, Deere & Company, Johnson & Johnson, Monsanto, MasterCard, General Electric, Novartis and State Farm Insurance.