Index of Leading Economic Indicators (LEI)

The LEI is a composite of 10 different indicators, designed to predict future aggregate economic activity. The Index usually reaches peaks and troughs earlier than the overall economic cycle, which makes it an important tool for forecasting and planning. The LEI’s individual components are selected from various sectors of the economy, including manufacturing, building, financial, retail and consumer variables. The components were chosen because of their economic relevance and statistical adequacy. They are weighted equally to provide a net contribution to the composite index. The specific leading indicators – selected from various sectors of the economy – include the following: the average work week, weekly jobless claims, manufacturers’ new orders for consumer goods and materials, vendor performance, contracts and orders for new plant and equipment, building permits, stock prices (S&P500), interest rate spread of 10-year Treasury note minus federal funds rate, money supply (M2), and consumer expectations index. Markets rarely react to the LEI.

POTENTIAL IMPACT ON INTEREST RATES: LOW