Leading Economic Index Crying Wolf on Recession, Says Ned Davis Research
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The Conference Board's Leading Economic Index (LEI) has declined for 20 straight months, which has historically always signaled a recession. However, the index may be "crying wolf" this time.
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The LEI relies too heavily on goods-focused components rather than services, which now make up 85% of the economy. This makes the index less relevant.
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The LEI failed to catch the sharp economic rebound in late 2022 when GDP grew 5% as it’s focused on goods not services.
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While LEI components like orders and permits remain down from early 2022 peaks, they have risen off recent lows.
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One day a recession will come but not because of repeated warnings from the outdated LEI, according to Ned Davis Research. More service-oriented components are needed.