The Leading Economic Index (LEI) is an economic indicator that measures the overall health and direction of the economy. It is a composite index of several other economic indicators, which are believed to be leading indicators of economic activity. The LEI is designed to provide a clear signal of future economic growth or contraction.
The LEI is published monthly by The Conference Board, a non-profit research organization, and is composed of 10 individual components, including:
Average weekly hours worked in manufacturing
Average weekly initial claims for unemployment insurance
Manufacturers’ new orders for consumer goods and materials
ISM® Index of New Orders
Manufacturers’ new orders for non-defense capital goods excluding aircraft orders
Building permits for new private housing units
Stock prices of 500 common stocks (S&P 500®)
Leading Credit Index™
Interest rate spread, 10-year Treasury bonds less federal funds
Average consumer expectations for business conditions
The LEI is calculated by aggregating these 10 components and applying a weighting system. The components are weighted based on their perceived impact on the overall economy. The LEI is then standardized against a base year, which is assigned a value of 100.
A reading above 100 indicates that the economy is expanding, while a reading below 100 indicates that the economy is contracting. The rate of change in the LEI is also significant, as it provides an indication of the direction and strength of the economy.
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