Confidence → Leading index

Common explanation (Knock-on · same direction): Business and consumer confidence surveys pick up turning points in the economy early, moving with the leading index.

This issue: Confidence at 22 (cool), Leading index at 42 (neutral) — at least one is in the neutral range (40⁠–⁠60), so we make no call this issue.

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

Confidence: Now 99.24. Leading index: Now 100.14.

Tests

Does this link hold up?

Common explanationBusiness and consumer confidence surveys pick up turning points in the economy early, moving with the leading indexSource: OECD, “Business confidence index (BCI)”.
Tested against our dataAgreement between the positions of Confidence and Leading index (same month), measured in the direction of the common explanation: +0.77. Looking at every 5-year period (shifted one year at a time), the two moved in that direction in all 36, but that does not mean they always will. Supported by the data
Periods when it did not holdAcross 36 5-year periods, out of step in none.

History

The two lines, overlaid

Data: OECD business and consumer confidence indicators; Organisation for Economic Co-operation and Development (OECD), Composite Leading Indicators. Positions: our calculation.

ConfidenceLeading index

Time lag

At what lag do they match best?

Longer bar = moves more in the direction of the common explanation (the number is the agreement).

same month+0.77
3-month lag+0.65
6-month lag+0.43
9-month lag+0.19
12-month lag−0.01
18-month lag−0.21

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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