Leading Index MoM

The Conference Board Leading Economic Index (LEI) for Australia is a monthly composite, or weighted average, of 7 market and administrative series. It comes from The Conference Board, a nonprofit think tank founded in 1916, and leads business cycle turning points by around 7 months. It is not a survey, so it polls no consumers or firms, and it does not measure current output. Its companion Coincident Economic Index (CEI) tracks current conditions with real GDP, while the LEI smooths component volatility to reveal shared turns.

The publisher issues 1 release per reference month, about 6 to 7 weeks after that month ends, at 10:30 AM Eastern Time. Each release pre-announces the next date and is posted with a calendar. It uses series available as of 10 AM Eastern days before publication, and estimates missing values.

Revisions normally cover the past 6 months, with full history revised at annual benchmarks, or yearly method reviews. Every release shows CEI changes, history charts with publisher-set recession shading, contributions, and diffusion breadth. It adds a six-month growth chart, a yearly GDP chart, a quote, and a data link. Read direction and breadth, not the level alone.

The LEI blends 7 series spanning rates, shares, liquidity, trade, inventories, profits, and housing.

• Yield Spread and Share Prices, 12.02% and 4.37%: 10 year yield and policy rate gap plus All Ordinaries S&P/ASX 200 expectations.
• Money Supply M3, 25.40%: broad liquidity, adjusted for consumer price inflation.
• Rural Goods Exports, 2.84%: external demand for farm exports, adjusted for price changes.
• Sales to Inventory Ratio, 36.33%: nonfarm inventory pressure from sales relative to stocks, linearly interpolated from quarterly data.
• Gross Operating Surplus, 13.36%: private company profit pulse, linearly interpolated from quarterly data.
• Building Approvals, 5.67%: housing pipeline, adjusted for price changes.

In the June 2024 example, published August 15, 2024, the LEI fell 0.1% to 113.8, partly reversing a 0.3% May rise. It fell 1.1% over the first half, faster than the 0.7% prior half fall. The CEI rose 0.3% to 115.8 after a 0.2% May rise, growing 1.0% in the half against 0.1% before.

Approvals subtracted 0.14 and money supply 0.06, against rural exports plus 0.15, profits plus 0.06, and shares plus 0.04. The spread lost 0.01 and inventories were flat at 0.00. Over six months, inventories dragged 0.22, the spread 0.11, and approvals 0.08, against shares at plus 0.10.

The 6 month path stayed above the minus 2.9% line, so no joint recession signal fired. The publisher still expected 1.3% GDP growth in 2024.

1. Monthly change: yield spread uses simple subtraction, while all other series use a symmetric change formula that divides by the two-month average. Inputs arrive seasonally adjusted, price adjusted, with quarterly gaps interpolated and missing values estimated.
2. Standardize: multiply each change by its factor, or weight, which calms volatile series so each contributes evenly.
3. Sum and trend adjust: sum the 7 contributions, then add the Australia trend adjustment, a small negative constant.
4. Cumulate: chain the adjusted change into the index level with a symmetric formula. For illustration only, prior 115.0 with contributions of minus 0.075 and a minus 0.153 trend factor gives about 114.74, or about minus 0.2%.
5. Rebase: rescale the chain so average 2016 equals 100, with factors to four decimals, contributions to two, and index levels to one.
6. Diffusion and 3Ds check: score each component 1.0 for a rise over 0.05%, 0.5 for flat, and 0.0 for a fall. Scores run on a 0 to 100 scale for one-month and six-month spans. This 3Ds check tracks duration, depth, and diffusion. It flags risk only when breadth sits below 50 and the 6 month fall drops below minus 2.9%.