Leading Economic Index Surprises on the Upside

Summary The 0.9% increase in the Leading Economic Index (LEI) in July bested consensus expectations with strength from financial components and ISM orders. Future gains will get tougher as the pivot to services starts to weigh on orders and early measures suggest Delta/COVID could be weighing on consumer sentiment in August.

Credit Worthy: LCI Leads LEI HigherThe Leading Economic Index (LEI) returned to more broad-based strength in July, with every component contributing positively to a 0.9% gain on the month. The Leading Credit Index and the interest rate spread accounted for two out of the top three contributions, adding 0.19 and 0.14 to the top-line, respectively. The steady contribution of the Leading Credit Index over the past few months underscores the health of household and financial sector balance sheets, despite the economic tumult of the past 18 months. The yield on the 10-year Treasury security continued to slip in July. While some of the decline may be tied to lower expectations for long-term growth, the spread between the 10-year Treasury security and the fed funds rate, which feeds into LEI, remained positive and consistent with further expansion. Last among the financial indicators, stock prices also added 0.11 to the index in July. While there was some indication in the minutes of the July FOMC meeting that the Fed might tighten sooner than some expected, general financial conditions remain quite favorable. READ FULL ARTICLE >>