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 China decreased by 1.0 percent in November 2022 to 161.4 (2016=100), following a 0.8 percent decline in October. In addition, the LEI contracted by 3.1 percent from May to November of 2022, a steeper decline than its 0.8 percent contraction over the previous six months.

The Conference Board Coincident Economic Index^® (CEI) for China increased by 0.4 percent in November 2022 to 138.4 (2016=100), after a 1.2 percent decrease in October. The CEI grew by 3.7 percent in the six-month period between May and November 2022, faster than the 1.4 percent decline between November 2021 and May 2022.

“November marked the ninth consecutive month of declines in the China LEI, suggesting there is an elevated risk of economic downturn in the near term,” said Andrew Dearborn, Economic Research Assistant at The Conference Board. “The only components to contribute positively in November were new medium- and long-term loans and machinery imports. There are many headwinds to growth in China as global demand slows, disruptions from Covid-19 persist, and the property downturn continues. The continued weakness suggests heightened risk of economic slowdown. The Conference Board downgraded its real GDP growth forecasts for year-over-year growth to 3.3 percent in 2022 down from 3.7 percent, and 5.1 percent in 2023, down from 5.3 percent.”

The trajectory of the LEI suggests slower growth is a risk over the short run

Over the past 6 months, consumer expectations and the logistics prosperity index led the decline in the LEI 

Continued weakness in the LEI points to an economic slowdown

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 -2.5 percent. The red dotted line is drawn at the threshold value (measured by the median, -2.5 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

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