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 China ticked up by 0.1 percent in June 2023 to 155.5 (2016=100), following no change in May. The LEI contracted by 0.6 percent from December of 2022 to June of 2023, a much smaller rate of decline than - 4.3 percent over the previous six months.

The Conference Board Coincident Economic Index^® (CEI) for China improved by 1.5 percent in June 2023 to 142.6 (2016=100), after a 0.4 percent increase in May. The CEI grew by 4.1 percent in the six-month period between December 2022 and June 2023, a reversal from a decline of 1.7 percent between June and December of 2022.

“The LEI for China inched up in June, which was only the second increase in the past 6 months,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “The monthly increase was driven by firmer medium- and long-term loans and an increase in imports of machinery and transport equipment, which more than offset declines among all other components. China’s growth prospects still face obstacles including  skills mismatches in the labor market, housing market weakness and reduced global demand. The Conference Board forecasts GDP growth to be 5.1 percent in 2023, with further slowing in 2024.”

The China LEI edged up in June 

Despite improvemnet in the June LEI, weaknesses among non-financial (real economy) components were widespread

Six-month growth in the China LEI remained negative, suggesting moderate growth ahead

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 -3.1 percent. The red dotted line is drawn at the threshold value (measured by the median, -3.1 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 China: 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 eight components of The Conference Board Leading Economic Index^® for China include Consumer Expectation Index, PMI: Mfg: New Export Order, 5000 Industrial Enterprises Survey, Logistics Prosperity Index, Loan: Medium & Long Term, Floor Space Started, City Labor Market: Demand, and Imports: Machinery and Transport Equipment.

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