When the Conference Board released its Leading Economic Index on Friday, the index fell by 6.7% in March to a reading of 104.2. While the report followed a 0.2% drop in February and a 0.4% gain in January, what should stand out here is that this was the largest single monthly decline in the index’s 60-year history.
Perhaps the only good news in the report was that the Econoday consensus was calling for a 7.0% drop and the Wall Street Journal had projected a 7.2% drop as its consensus.
Unfortunately for the markets and the economy, this is forecasting a very deep contraction. The coincidental indicators fell by 0.9% in March, while the lagging indicators increased by 1.2% in March.
Much of the economic reporting that make up the leading indicators already has been seen by the time the reporting comes out. While this was the largest monthly drop, the 104.2 reading has a long way to fall if the 2008 to 2009 financial crisis has much weight today. The leading indicators fell to an index reading of roughly 75 in early 2009 when the economy was cratering.
Ataman Ozyildirim, Senior Director of Economic Research at the Conference Board, said:
In March, the US LEI registered the largest decline in its 60-year history. The unprecedented and sudden deterioration was broad based, with the largest negative contributions coming from initial claims for unemployment insurance and stock prices. The sharp drop in the LEI reflects the sudden halting in business activity as a result of the global pandemic and suggests the US economy will be facing a very deep contraction.
The Conference Board also recently had other very weak reports. These included a 12.6-point drop in consumer confidence, a 44.73% decline in the Employment Trends Index, a 1.5% decline in the Help Wanted Online reading and a 9.0-point drop in the CEO Confidence reading.