December 2017 Leading Economic Index

More growth is the message from the latest release of the Conference Board’s Leading Economic Index (LEI).  In fact, the December 2017 iteration suggests an acceleration of economic output as the LEI increased to 0.6 percent from the upwardly revised tally of 0.5 percent (originally 0.4 percent).  The recent strength in this indicator bodes well for the first half of 2018.

Seven of the LEI’s 10 components improved in the period, two were unchanged, and one deteriorated marginally.  A strong showing in new orders from the Institute for Supply Management did the heaviest lifting in the period.  The Conference Board’s proprietary Leading Credit Index boosted the tally also.  Both financial market components (stock prices and the yield curve) added to the total as well.  Slightly smaller contributions were made by consumer expectations for business conditions, capital goods orders from businesses, and orders for consumer goods and materials.  Building permits and weekly initial claims for state unemployment insurance held steady.  The only negative sign in the report came from the average workweek for production workers.

In sum, this was an encouraging release.  It builds on the previous two positive iterations in October and November.  Furthermore, participation among the ten components has been widespread during the past three months.  Finally, LEI’s six-month pace of growth continues improving.  From the perspective of this indicator, there is no recession on the horizon.