LEI Growth Supportive of Multiple Fed Rate Hikes in 2018

Today’s 0.3 percent increase in the Leading Economic Index (LEI) for March follows a 0.7 percent increase in February and a 0.8 percent increase in January. The index suggests continued economic growth through 2018.

Up, Up and Up

• The LEI continued its upward ascent in March, reaching a series high of 109.0. The index has not posted a negative month-overmonth reading since May 2016.
• The interest rate spread and ISM new orders were the greatest contributors to the headline figure, adding 0.15 and0.13 percentage points, respectively. Recently, there has been anencouraging balance of strength among the hard and soft data.

Labor Market Bears Watching

• The components related to the labor market, initial jobless claimsand manufacturing hours worked, shaved off 0.05 and 0.07 percentage points, respectively. This pullback comes on theheels of an encouraging February in which these componentswere the greatest buoys to the index.
• The weakness in the labor indicators does not come as much of a surprise given March’s underwhelming nonfarm payroll report.

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