LEI for Australia Dipped in February

About the Leading Economic Index and the Coincident Economic Index:

The Leading Economic Index provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. The Coincident Economic Index provides an indication of the current state of the economy. Additional details are below.

The Conference Board Leading Economic Index^® (LEI) for Australia decreased by 0.3 percent in February 2024 to 115.9 (2016=100), reversing a 0.3 percent increase in January. Overall, the LEI grew still by 0.7 percent from August 2023 to February 2024, a significant improvement after the contraction of 2.6 percent over the previous six months.

The Conference Board Coincident Economic Index^® (CEI) for Australia remained unchanged in February 2024 at 114.8 (2016=100), after an increase of 0.1 percent in January. The CEI grew by 0.2 percent from August 2023 to February 2024, a much smaller increase than the 1.0 percent gain over the previous six months.

"The LEI for Australia dipped in February, after four consecutive months of increase," said Ian Hu, Economic Research Associate at The Conference Board. "Large negative contributions from building approvals and rural goods exports drove the decline while money supply and the sales to inventories ratio contributed positively. Despite this decline, the LEI growth remains positive on a six-month basis and the annual change of the Index has become less negative. This still suggests that downward pressures on economic growth may ease in the coming months. The Conference Board currently forecasts Australia's real GDP growth to strengthen moderately after the weak second half of 2023 and reach 1.4 percent in 2024."

The Australia LEI dipped slightly in February

Building approvals and rural goods exports drove the decline in the LEI decline

The Australia LEI remained outside of recession signal territory in February

Note: The chart illustrates the so-called 3D's rule which is a reliable rule of thumb to interpret the duration, depth, and diffusion - the 3D's - of a downward movement in the LEI. Duration refers to how long-lasting a decline in the index is, and depth denotes how large the decline is. Duration and depth are measured by the rate of change of the index over the last six months. Diffusion is a measure of how widespread the decline is (i.e., the diffusion index of the LEI ranges from 0 to 100 and numbers below 50 indicate most of the components are weakening). The 3D's rule provides signals of impending recessions 1) when the diffusion index falls below the threshold of 50 (denoted by the black dotted line in the chart), and simultaneously 2) when the decline in the index over the most recent six months falls below the threshold of -6.9 percent. The red dotted line is drawn at the threshold value (measured by the median, -6.9 percent) on the months when both criteria are met simultaneously. Thus, the red dots signal a recession.

About The Conference Board Leading Economic Index®(LEI) for Australia

The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or "leads") turning points in the business cycle by approximately 7 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle.

The seven components of The Conference Board Leading Economic Index® for Australia include: Yield Spread, Share Prices, M3 Money Supply, Building Approvals, Rural Goods Exports, Sales to Inventories Ratio, and Gross Operating Surplus.

To access data, please visit: https://data-central.conference-board.org/

About The Conference Board

The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Ahead™. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. ConferenceBoard.org

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