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 China fell by 0.6 percent in April 2023 to 155.3 (2016=100), after improving by 0.3 percent in March. The LEI contracted by 2.8 percent from October of 2022 to April of 2023, an improvement from the decline of 3.4 percent over the previous six months.

The Conference Board Coincident Economic Index^® (CEI) for China declined by 2.1 percent in April 2023 to 141.5 (2016=100), a reversal from the 2.3 percent increase in March. The CEI grew by 2.2 percent in the six-month period between October 2022 and April 2023, much slower than a 6.5 percent increase between April and October of 2022.

“The China LEI fell in April with nearly all components contributing to the decline. Only new medium- and long-term loans contributed positively in the month,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Weak consumer expectations and declining housing starts are domestic headwinds to the economic outlook. Subdued new export orders for manufacturing and imports of machinery and transport equipment also reflect external headwinds to economic growth. The Conference Board forecasts real GDP growth of 5.1 percent in 2023, but the expansion path is likely to be volatile in coming months.”

The China LEI in April reversed its improvement from the previous month

Weaknesses among non-financial components drove the decline in the LEI

Risks of an economic downturn remain elevated for China’s economy

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 -3.1 percent. The red dotted line is drawn at the threshold value (measured by the median, -3.1 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 China: 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 5 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 China include Consumer Expectation Index, PMI: Mfg: New Export Order, 5000 Industrial Enterprises Survey, Logistics Prosperity Index, Loan: Medium & Long Term, Floor Space Started, City Labor Market: Demand, and Imports: Machinery and Transport Equipment.

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