Philly Fed → Leading index

Common explanation (Knock-on · same direction): Business surveys are among the earliest signals of where the economy is heading.

This issue: Philly Fed at 75 (warm), 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

Philly Fed: Now 20.9. Leading index: Now 100.14.

Tests

Does this link hold up?

Common explanationBusiness surveys are among the earliest signals of where the economy is headingSource: Federal Reserve Bank of Philadelphia, “The Philly Fed Index Turns 50 with Steadfast Success” (2018).
Tested against our dataAgreement between the positions of Philly Fed and Leading index (same month), measured in the direction of the common explanation: +0.31. Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 42 of 44. Weak or inconsistent
Periods when it did not holdAcross 44 5-year periods, out of step in 1989⁠–⁠1994 and 2003⁠–⁠2008.

History

The two lines, overlaid

Data: Federal Reserve Bank of Philadelphia, Manufacturing Business Outlook Survey, via FRED (Federal Reserve Bank of St. Louis); Organisation for Economic Co-operation and Development (OECD), Composite Leading Indicators. Positions: our calculation.

Philly FedLeading index

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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