Leading Indicators Suggest an Accelerating U.S. Economy

Economic Blog Posted by lplresearch

Friday, April 23, 2021

The economic reacceleration is underway in the U.S., as the expanding vaccination campaign, lifting of mobility restrictions, and infusion of fiscal stimulus combined to lift the Conference Board’s Leading Economic Index (LEI) in March. The LEI grew 1.3% month over month, ahead of Bloomberg consensus forecasts of 1%, raising the Conference Board’s gross domestic product (GDP) expectations to 6% on a year-over-year basis.

After a weaker-than-expected February release that was primarily disrupted by the winter storm, data in March snapped back in a strong fashion. All ten components of the LEI rose in March, while jobless claims were the largest contributor to the growth of the index. Labor market data has continued to improve since the measurement period, as weekly jobless claims have posted back-to-back pandemic lows. The ISM New Orders Index was the second largest contributor to the LEI, which climbed to its highest levels since 2004.

The Conference Board revised the February data lower, however, snapping what was a 10-month streak of growth for the index. As shown in the LPL Chart of the Day, the LEI is back on the rise, suggesting further economic momentum in the coming months:

View enlarged chart.

“Momentum breeds momentum, and we expect the U.S. economy will continue to improve in the coming months as we move forward with reopening plans,” noted LPL Financial Chief Market Strategist Ryan Detrick. “As the rest of the world continues to improve as well, we expect some spill-over effects to also benefit the US economy.”

The U.S. is currently vaccinating around 3 million people per day, according to the Center for Disease Control (CDC), and over half of the adult population has received at least one dose of the vaccine. Meanwhile, over 80% of the population above the age of 65—the most at-risk age segment of the population—has received at least one dose of the vaccine. The improving vaccination data has helped embolden policymakers to lift restrictions, and prompted us to upgrade our GDP forecast for the U.S. to 6.25-6.75% in our recent Weekly Market Commentary.


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