The Leading Index is not typically a market-moving event because analysts can generally peg where the numbers will hit because the ten components that make up the index are generally known prior to the monthly release.
The Conference Board’s Leading Economic Index
The LEI fell 0.3% in April following an upwardly revised 0.7% rise in March and a 0.9% increase in February. April’s dip is the first decline since June 2010, when the already sluggish recovery temporarily entered a period of slower growth.
Six of the ten components that make up the index fell, with the largest being weekly jobless claims.
Ataman Ozyildirim, an economist at The Conference Board, noted, “Overall, the composite indexes still point to strengthening business conditions in the near term, although the path may be uneven.”
Ken Goldstein, also at the Conference Board, added, “Economic growth will likely continue through the summer and fall, but the pace of economic activity may be choppy.”
The decline in April is consistent with much of the recent data, which has been pointing to a slowdown in economic activity.
Weekly jobless claims – an excellent barometer of economic activity – have risen in recent weeks and are holding at an elevated level above 400,000.
The ISM Services Index detected a deceleration in activity last month, while housing continues to struggle and regional surveys of manufacturing during May have detected modest weakness.
Further, a $1 per gallon jump in gasoline prices from a year ago has complicated the recovery in consumer spending.
A new recession seems unlikely at this point, but any moderation in economic activity will probably hinder job creation. And that may put policymakers at the Fed on edge, as the contemplate the end of their second round of QE.
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