Leading Indicators Seeing Recession Next Spring

Confirming the current strength of the economy was October’s 0.2% increase in the Index of Coincident Economic Indicators (CEI) to a new record high. That’s consistent with real GDP growth of around 2.0% y/y (chart).

The bad news is that the Index of Leading Economic Indicators (LEI) peaked at a record high during February and is down 3.8% over the past eight months through October (chart). It has had a good track record of calling the past seven recessions before the pandemic lockdown. On average, it has peaked 14 months prior to the peak in the CEI. That would put the start of the next recession around March of next year. That’s the LEI model’s forecast, not ours.