Global Leading Indicators

The Conference Board Leading Economic Index^®(LEI) for Germany remained unchanged in December 2022 at 91.1 (2016=100), after increasing by 0.2 percent in November. However, the LEI declined by 2.1 percent in the six-month period from June to December 2022, after a 3.9 percent contraction over the previous six-month period.

The Conference Board Coincident Economic Index^® (CEI) for Germany declined by 0.6 percent in December 2022 to 103.5 (2016=100), after growing by 0.2 percent in November. The CEI contracted by 0.4 percent in the six-month period from June to December 2022, after growing by 0.5 percent over the six-month period from December 2021 to June 2022.

“The LEI for Germany held steady in December after gaining in November, and its downward trajectory which began in February 2022 may have troughed,” said Allen Li, Associate Economist at The Conference Board. “The LEI for Germany remains about 2 percent lower compared to six months ago which still suggests the balance of risks may be tilted on the downside for the German economy. While consumers were less pessimistic, and the stock market staged a recovery from 2022 lows, leading indicators of manufacturing point to weaknesses in construction and investment goods. Available data indicate that German GDP growth fell in Q4 ‘22 and The Conference Board projects that the German economy could contract further in Q1 ’23 before recovering in subsequent quarters.”

The Germany LEI Held Steady in December

Consumer confidence and stock prices contributed positively, and offset weakening new orders for construction and investment goods

The LEI may be pointing to economic recovery later this year 

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 -4.6 percent. The red dotted line is drawn at the threshold value (measured by the median, -4.6 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 Germany: 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 seven components of The Conference Board Leading Economic Index^® for Germany include: New Orders, Yield 10-Year Minus 3-Month Time Deposits Rate, Consumer Confidence Index, Inventory Change, New Residential Construction Orders, Stock Price Index, and Gross Enterprises and Properties Income.

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