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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 the Euro Area declined by 0.4 percent in March 2024 to 99.4 (2016=100), following a 0.6 percent drop in February. As a result, the LEI contracted by 4.2 percent over the six-month period from September 2023 to March 2024, a smaller rate of decline than over the six-month period from March to September 2023.
The Conference Board Coincident Economic Index® (CEI) for the Euro Area increased by 0.2 percent in March 2024, to 108.3 (2016=100), after no change in February. The CEI grew by 0.3 percent over the six-month period from September 2023 to March 2024, after contracting by 0.2 percent over the previous six-month period.
“The Euro Area LEI continued to drop in March” said Ian Hu, Economic Research Associate, at The Conference Board. “A large negative contribution from the yield spread, combined with weaker consumer expectations, manufacturing new orders and volume of order books drove the Index down. With the Index six-month growth rate still below its long-term trend and given the widespread weakness among its components, the LEI continues to signal the risk of a forthcoming recession in the Euro Area. Against this background of persisting headwinds to economic activity, the Conference Board currently projects a modest 0.6 percent real annual GDP growth in 2024.”
The Euro Area LEI continued to fall
Non-financial components and the yield spread led the decline of the LEI in March
The Euro Area LEI continues to flash for a possible forthcoming recession
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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.
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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.
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. ConferenceBoard.org
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