Economy Up, Leading Index Down

Source: Economics Group of Wells Fargo Bank, N.A. Summary The Leading Economic Index (LEI) was down again in October. For more than a year and a half this bellwether has signaled a recession that has yet to arrive. We look at prior cycles to consider to what extent the severity of decline in LEI is indicative of the magnitude of recession. If This Is Easy, I Don’t Want to See Difficult The Leading Economic Index (LEI) is supposed to make it easy to keep tabs on the economy, so why is making sense of it so hard? The composite of multiple leading indicators fell another 0.8% in October and has now declined for 19 consecutive months (chart). Yet the first estimate for third quarter real GDP growth was a red-hot 4.9%, revised data next could put a 5-handle on that growth rate. What gives? After 19 straight monthly declines, usually we’d be in a recession by now. We looked at the peak-to-trough declines in this bellwether in prior cycles to find a similar period, and we found one. Between April 2000 and October 2001, the LEI contracted 12.1%. We’ve very nearly matched the magnitude of that decline in this cycle. Through today’s October numbers, the LEI is down 11.7%. READ FULL ARTICLE >>