Global Leading Indicators

The Conference Board Leading Economic Index^®(LEI) for Germany improved by 0.4 percent in January 2023 to 90.4 (2016=100), after declining by 0.2 percent in December 2022. However, the LEI is still down by 2.2 percent in the six-month period from July 2022 to January 2023, after a 5.1 percent contraction over the previous six-month period.

The Conference Board Coincident Economic Index^® (CEI) for Germany increased by 0.3 percent in January 2023 to 104.1 (2016=100), after falling by 0.2 percent in December 2022. The CEI grew by 0.2 percent in the six-month period from July 2022 to January 2023, after growing by 0.1 percent over the six-month period from January to July 2022.

“The LEI for Germany improved in January, but the index has been down in four of the last six months,” said Allen Li, Associate Economist at The Conference Board. “While the recent uptick suggests LEI’s downward trajectory may be bottoming, the level of the LEI for Germany remains well below the highs last seen in mid-2021. This suggests the balance of risks may still be tilted to the downside for the German economy. Consumers may be seeing better conditions ahead due to a milder-than-expected winter and lower energy prices, but inflation remains persistently high. Available data indicate that German real GDP fell in Q4 ‘22 and The Conference Board projects a further contraction in Q1 ’23, before picking up later this year.”

The Germany LEI improved at the start of 2023

LEI was buoyed in January by improving consumer expectations and stock markets

The Germany LEI no longer signaled recession in January 2023 

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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