Global Leading Indicators

The Conference Board Leading Economic Index^®(LEI) for the United Kingdom declined by 0.8 percent in December 2022 to 79.2 (2016=100), following a 0.4 percent drop in November. The LEI for the UK contracted by 3.5 in the six-month period ending in December 2022, at a rate greater than its 1.4 percent contraction over the previous six-month between December 2021 and June 2022.

The Conference Board Coincident Economic Index^® (CEI) for the United Kingdom ticked up by 0.1 percent in December 2022 to 103.9 (2016=100), after remaining unchanged in November. The CEI for the UK contracted by 0.1 percent in the six-month period from June to December 2022, the same rate of decline as over the previous six-month period.

“The UK LEI fell further in December, continuing the declining trend that began ten months ago in March 2022, pointing to elevated recession risks in 2023,” said Allen Li, Associate Economist at The Conference Board. “Housing sales expectations and consumer confidence remain depressed, which is an ongoing drag on the economic outlook. Available data indicate that GDP in the U.K. was flat in Q4 ’22, and The Conference Board forecasts that real GDP in the U.K. is projected to fall by 0.8 percent year-over-year in 2023.” 

The LEI for U.K. declined for the tenth consecutive month in December

Housing sales expectations and consumer confidence remain depressed

Widespread weakness and persistent declines in the U.K. LEI point to continued recession risk

Note: The chart illustrates the so-called 3D’s rule which is a reliable rule of thumb to interpret the duration, depth, and diffusion – the 3D’s – of a downward movement in the LEI. Duration refers to how long-lasting a decline in the index is, and depth denotes how large the decline is. Duration and depth are measured by the rate of change of the index over the last six months. Diffusion is a measure of how widespread the decline is (i.e., the diffusion index of the LEI ranges from 0 to 100 and numbers below 50 indicate most of the components are weakening). The 3D’s rule provides signals of impending recessions 1) when the diffusion index falls below the threshold of 50 (denoted by the black dotted line in the chart), and simultaneously 2) when the decline in the index over the most recent six months falls below the threshold of -3.3 percent. The red dotted line is drawn at the threshold value (measured by the median, -3.3 percent) on the months when both criteria are met simultaneously. Thus, the red dots signal a recession.

About The Conference Board Leading Economic Index^® (LEI) for The United Kingdom: The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by 11 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle.

The eight components of The Conference Board Leading Economic Index^® for The United Kingdom include: Unemployment Claimant Counts, Weekly Working Hours, General Economic Situation, Stock Prices, Yield Spread, Productivity, Total Gross Operating Surplus of Corporations, Housing Sales Expectation.

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