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 dipped by 0.1 percent in October 2023 to 153.0 (2016=100), following a decline of 0.3 percent in September. The LEI fell by 1.4 percent from April to October of 2023, a smaller rate of contraction following a 2.8 percent drop over the previous six months.

The Conference Board Coincident Economic Index^® (CEI) for China improved by 0.8 percent in October 2023 to 145.4 (2016=100), after a downwardly revised 0.3 percent increase in September. The CEI grew by 4.0 percent in the six-month period between April to October of 2023, significantly faster than the 0.9 percent growth between October 2022 and April of 2023.

“The LEI for China fell for a seventh consecutive month,” said Ian Hu, Economic Research Associate, at The Conference Board. “The index saw improvement in machinery and transport equipment imports, followed by marginal positive contributions from the profitability survey, and medium- and long-term loans. However, the changes were not enough to offset the larger negative contributions from all remaining components, specifically, consumer expectations, which have deteriorated monthly since April 2022.Marginal improvement in the LEI on a year-over-year basis suggests headwinds to economic growth might be less intense near-term. Nonetheless, the Conference Board predicts that China’s real GDP will grow at a pace of 4.8 percent year-over-year in 2023, and slow to 4.1 percent year-over-year in 2024.”

The China LEI declined for the seventh consecutive month

In October, most China LEI components contributed negatively to the index

 Improvement in the YoY % change of the LEI suggests possible lessened 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 -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