LEI: The Indicator Who Cried Wolf?

Economics Group of Wells Fargo Bank, N.A. Summary The Leading Economic Index, a trusted composite of multiple leading indicators, fell for the 14th straight month in May. The LEI may have been early in its warning of a coming recession, but it is consistent with our own forecast, which anticipates an eventual recession early next year. One Day It Might Actually Be a Wolf In Aesop’s fable, villagers tuned out the shepherd boy who falsely warned of an approaching wolf and were caught off-guard when a REAL wolf came. Are we at risk of a similar complacency about the embedded warning in the Leading Economic Index? May marks the 14th consecutive monthly decline for the LEI. Somewhat reminiscent of the May retail sales report in which sales at building materials stores lifted the headline number, the 0.7% decline might have been worse had it not been for a +0.15 percentage point contribution from building permits, a dynamic we explore in greater detail below. READ FULL ARTICLE >>