Global Leading Indicators

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.

New York, January 16, 2024…The Conference Board Leading Economic Index^®(LEI) for the Euro Area fell by 0.7 percent in December 2023 to 101.1 (2016=100), following a 0.8 percent decline in November. As a result, the LEI contracted by 5.2 percent in the six-month period from June to December 2023, a significantly larger rate of decline than the 3.4 percent contraction over the previous six-month period from December 2022 to June 2023.

The Conference Board Coincident Economic Index^® (CEI) for the Euro Area marginally increased by 0.1 percent in December 2023 to 108.2 (2016=100), after also increasing by 0.1 percent in November. The CEI grew by 0.2 percent in the six-month period from June to December 2023, incrementally smaller than the 0.3 percent growth rate over the first half of 2023.

“The Euro Area LEI fell in December, marking consecutive declines since March 2022” said Ian Hu, Economic Research Associate, at The Conference Board. “Despite improvements to the stock index and systemic stress indicator, declines in remaining components offset these positive contributions. Many components, including consumer and business expectations and PMI Manufacturing New Orders, have consistently declined over the past year, suggesting mounting headwinds to growth in the near term. The Conference Board projects year-over-year real GDP to grow at a modest 0.6 percent rate in 2023, and by 0.6 percent in 2024.”

The Euro Area LEI continues to decline

Nearly all components negatively contributed to the Euro Area LEI in December

The leading economic indicator for Euro Area continues to signal a potential recession 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: 1987-present

About The Conference Board Leading Economic Index® (LEI) for Euro Area

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 1 month. 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 Euro Area include: ECB Yield Spread, Consumer Expectation of General Economy, Manufacturing New Orders, Volume of Order Books, Business Expectations Survey, Eurostoxx Index, Systemic Stress Composite Indicator, Building Permits.

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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. ConferenceBoard.org