What is it?
In December 1995, the Conference Board assumed responsibility for compiling the monthly Leading Indicators Index from the Commerce Department. According to the Conference Board, the Index has generally changed direction before "aggregate economic activity" follows suit. They warn, though, that a directional change in the index must be of significant "size, direction, and scope" to be of value; they do not, however, state specifically what size or scope is considered significant. Instead, they promote the Index as a way to signal either the level of risk of coming recession or the probability of recovery from recession.
The Index is said to have some predictive value, though Briefing.com quips that it has predicted "nine of the last six" recessions. The markets actually pay little or no attention to the Index at all. This is because it is primarily a compliation of previously-released data and is, therefore, very predictable. The Index indicators include Average Workweek, Weekly Jobless Claims, New Consumer Goods Orders, Vendor Performance, New Non-Defense Capital Goods Orders, Building Permits, the S&P 500, the M2 Money Supply, the spread between the 10-year Treasury yield and the Fed Funds Rate, and expectations found in the University of Michigan Consumer Sentiment Survey.
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