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 the Euro Area fell by 0.8 percent in May 2023 to 105.7 (2016=100), following a decline of 0.5 percent in April. Meanwhile, the LEI contracted by 3.1 percent in the six-month period from November 2022 to May 2023, slower than the 5.1 percent decrease over the previous six-month period from May to November 2022.

The Conference Board Coincident Economic Index^® (CEI) for the Euro Area increased by 0.2 percent in May 2023 to 108.1 (2016=100), following a 0.1 percent increase in April. The CEI grew by 0.5 percent in the six-month period from November 2022 to May 2023, slightly slower than the 0.6 percent increase over the previous six-month period.

“The Euro Area LEI fell for a fifteenth consecutive month in May, after year-over-year real GDP growth signaled a technical recession in the first quarter of 2023,” said Casey Cloutier, Economic Research Analyst at The Conference Board. “Most components contributed to the decline this month – notably falling manufacturing orders, worsening consumer expectations, and increasing systemic stress. The volume of order books was the only positive contributor. With inflation persistently above the ECB’s target, high interest rates are likely to remain as headwinds to growth. Because of this, The Conference Board projects that year-over-year real GDP growth will slow to just 0.8 percent in 2023, down from 3.3 percent in 2022.” 

The Euro Area LEI continued to fall while the CEI held steady

Most components contributed negatively to the LEI last month

The recession signal for the Euro Area may be receding, but the LEI continues to warn of headwinds to growth 

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.

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. www.tcb.org