Global Leading Indicators

About the Leading Economic Index and the Coincident Economic Index:

The Leading Economic Index provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. The Coincident Economic Index provides an indication of the current state of the economy. Additional details are below.

The Conference Board Leading Economic Index^® (LEI) for the United Kingdom declined by 0.8 percent in July 2023 to 74.5 (2016=100), following a 0.9 percent decrease in June. The LEI for the UK contracted by 4.9 percent in the six-month period ending in July 2023, continuing a 4.0 percent decline over the previous six-month period between July 2022 and January 2023.

The Conference Board Coincident Economic Index^® (CEI) for the United Kingdom held steady in July 2023 at 104.3 (2016=100), after also remaining unchanged in June. The CEI for the UK rose by a mere 0.1 percent in the six-month period from January to July 2023, a slower pace than the moderate 0.3 percent increase registered over the previous six-month period.

“The UK LEI fell again in July, and its trajectory is consistent with a possible recession in the year ahead,” said Allen Li, Associate Economist at The Conference Board. “The components of the LEI generally paint a weak picture on a monthly and six-month basis. Despite overall inflation starting to subside, underlying inflation remains elevated and sticky. This, together with  the effects of restrictive monetary policy probably will continue to weigh on economic growth. The Conference Board forecasts that real GDP in the United Kingdom will expand by a modest 0.4 percent year-over-year in 2023, down from 4.1 percent annual growth in 2022.”

The UK LEI declined again in July

The components of the LEI generally paint a weak picture on a monthly and six-month basis

The trajectory of the UK LEI continued to trend lower and a recession signal has flashed for four consecutive months

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.

To access data, please visit: https://data-central.conference-board.org/

About The Conference Board

The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.tcb.org