The Conference Board Leading Economic Index (LEI), which measures indicators of significant turning points in the business cycle and where the economy is headed in the near term, saw a rise for the first time in eight months and nearly completely reversed course from its October reading, posting a 0.3% increase for the month of November.
From May to November (the previous six months), the Leading Economic Index declined by 1.6%, slightly less than the 1.9% decline it saw in the six months preceding that (November 2023 to May 2024).
“The US LEI rose in November for the first time since February 2022,” said Justyna Zabinska-La Monica, senior manager, business cycle indicators at The Conference Board. “A rebound in building permits, continued support from equities, improvement in average hours worked in manufacturing and fewer initial unemployment claims boosted the LEI in November.”
The reading comes as homebuilders and real estate agents are also expressing confidence, with a new presidential administration and the prospect of at least some mortgage rate decrease in 2025.
Zabinska-La Monica specifically cautioned, however, that some of the positive housing data was not necessarily applicable to every region or sector.
“It’s worth noting that gains in building permits were not widespread geographically or by building type; they were concentrated mainly to the Northeast and Midwest, and on buildings with five-plus units rather than single-family dwellings,” she said. “Overall, the rise in LEI is a positive sign for future economic activity in the US. The Conference Board currently forecasts U.S. GDP to expand by 2.7% in 2024, but growth to slow to 2% in 2025.”
The Conference Board Coincident Economic Index (CEI), which rates the economy’s condition currently, improved by 0.1% in November to a reading of 113. The CEI’s rate of increase in November matched its rate of increase from July through October. This resulted in a 0.6% increase for the previous six months, which was slightly higher than the 0.5% growth from the six months preceding those (December 2023 – May 2024).
The CEI’s component indicators—payroll employment, personal income less transfer payments, manufacturing and trade sales and industrial production—are included among the data that is used to determine recessions in the United States. Among these components, personal income less transfer payments saw the biggest contribution to CEI for November (based on estimates), which was followed by payroll employment and manufacturing and trade sales, all of which served to offset a third consecutive month of decline in industrial production.
The 10 components of the Leading Economic Index for the U.S. are:
- Average weekly hours in manufacturing
- Average weekly initial claims for unemployment insurance
- Manufacturers’ new orders for consumer goods and materials
- ISM® Index of New Orders
- Manufacturers’ new orders for nondefense capital goods excluding aircraft orders
- Building permits for new private housing units
- S&P 500® Index of Stock Prices
- Leading Credit Index™
- Interest rate spread (10-year Treasury bonds less federal funds rate)
- Average consumer expectations for business conditions
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