Global Leading Indicators

Note: The January 2024 release of the leading composite economic index (LEI) for China (data for December 2023) updated the Retail Sales deflator, the retail price index, which has been discontinued since January 2023. Our research has shown that the consumer goods price index series is highly correlated with the former series. The former retail price index data will be used in the calculation of Retail Sales data as a component of the coincident economic index (CEI) until December 2022; it will be replaced with the consumer goods price index series from January 2023 to present.

This month’s release of the composite economic indexes incorporates 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.

For more information, please visit https://www.conference-board.org/topics/business-cycle-indicators/ or contact us at indicators@conference-board.org.

The Conference Board Leading Economic Index^®(LEI) for China dipped by 0.3 percent in December 2023 to 151.9 (2016=100), following a decline of 0.5 percent in November. The LEI fell by 2.3 percent from June to December of 2023, a materially larger rate of contraction following a 0.8 percent drop over the previous six months.

The Conference Board Coincident Economic Index^® (CEI) for China increased by 0.7 percent in December 2023 to 146.1 (2016=100), more than reversing a 0.1 percent decrease in November. Additionally, the CEI grew by 3.5 percent in the six-month period between June and December of 2023, significantly faster than the 1.7 percent growth rate between December 2022 and June of 2023.

“The LEI for China fell slightly in December,” said Ian Hu, Economic Research Associate, at The Conference Board. “The decline was fueled by non-financial components, namely the consumer expectation index and PMI New Export Order in Manufacturing. Additionally, of the eight components, five have weakened over the past six months. The general negative trend of the LEI since early 2022 continues to indicate headwinds to economic growth ahead. China’s real GDP grew at a pace of 5.2 percent year-over-year in 2023, but The Conference Board projects that it will slow to 4.1 percent year-over-year in 2024.”

The China LEI continued to decline in December

The majority of components contributed negatively to the LEI in December

The LEI for China signals the potential for weaker growth ahead

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 -6.9 percent. The red dotted line is drawn at the threshold value (measured by the median, -6.9 percent) on the months when both criteria are met simultaneously. Thus, the red dots signal a recession.

The composite business cycle indexes pre- and post- benchmark revisions: 1986-present

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