Comprehensive Benchmark Revisions for the Conference Board Leading Economic Index for the United States

• Activity Number: 19
• Type: Topic Contributed
• Date/Time: Sunday, July 29, 2012 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Ataman Ozyildirim*+ and Gad Levanon and Brian Schaitkin and Justyna Zabinska La-Monica and Jean-Claude Manini
• Companies: The Conference Board and The Conference Board and The Conference Board and The Conference Board and The Conference Board
• Keywords: business cycles ; leading economic indexes ; time series ; out of sample forecasting ; diffusion indexes ; turning points

Abstract

Following an extensive reevaluation of existing indicators included in The Conference Board Leading Economic Index® for The United States, we propose a comprehensive revision of the composite index. The changes in the LEI composition include: 1) using a new Leading Credit Index (LCI) rather than real money supply (M2) starting in 1990 (real M2 remains in the index before 1990); 2) replacing the ISM Supplier Delivery Index with the ISM New Orders Index; 3) replacing the Reuters/University of Michigan Consumer Expectations Index with a new indicator of consumer expectations of business and economic conditions; and 4) excluding aircraft orders from the "New Orders for (nondefense) Capital Goods" component. These changes are assessed using turning point analysis, probit models and an indicator scoring system based on Markov Switching models. Real time out-of-sample forecasting exercises are