Global Leading Indicators

Next month’s release of the composite economic indexes will incorporate annual benchmark revisions which bring them up-to-date with revisions in the source data. These revisions do not change the cyclical properties of the indexes. The indexes are updated throughout the year, but only for the previous six months. Data revisions that fall outside of the moving six-month window are not incorporated until the benchmark revision is made and the entire histories of the indexes are recomputed. As a result, the revised indexes, in levels and month-on-month changes, will not be directly comparable to those issued prior to the benchmark revision.

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The Conference Board Leading Economic Index^®(LEI) for the United Kingdom fell by 0.8 percent in October 2022 to 79.2 (2016=100), following a downwardly revised 1.0 percent decline in September. The LEI for the UK contracted by 4.1 in the six-month period ending in October 2022, a reversal from its 0.5 percent growth rate over the previous six-month between October 2021 and April 2022.

The Conference Board Coincident Economic Index^® (CEI) for the United Kingdom improved by 0.2 percent in October 2022 to 103.9 (2016=100), after remaining unchanged in September. The CEI for the UK contracted by 0.3 percent in the six-month period from April to October 2022, after growing by 0.4 percent over the previous six-month period.

“The UK LEI fell further in October, continuing its downward trajectory since March, suggesting recession risks remain elevated for the UK economy in the near term,” said Allen Li, Associate Economist at The Conference Board. “Weakening consumer confidence and falling housing sales expectations continue to be the largest negative contributors to the LEI. High inflation and tighter monetary policy will be a further drag on growth in the near term. The Conference Board projects a slight contraction of 0.2 percent in Q4 2022, with real GDP decreasing by 0.8 percent overall in 2023.” 

The trajectory of the UK LEI has been on the downslope since March 

Worsening consumer confidence and housing sales expectations were the largest negative contributors to the LEI 

The six-month growth rate of the LEI fell further into negative territory pointing to a likely recession heading into 2023

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 -2.6 percent. The red dotted line is drawn at the threshold value (measured by the median, -2.6 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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About The Conference Board

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