Steep decline is the only description for the index of leading economic indicators which, if recession doesn't appear, will raise questions over this report's methodology. The LEI fell a full and severe 1.0 percent in December following a downward revised 1.1 percent drop in November. This index has fallen for eight straight months!

The Conference Board describes December's decline as widespread including detriorating conditions in the labor market, manufacturing, residential construction and the financial markets. Note that trouble in the labor market is in reference to jobless claims which have since, so far in January at least, turned lower and sharply lower at that.

Despite this report's evident and profound weakness, the Conference Board seems to be hedging its bet a bit, saying overall economic activity is"likely to turn negative in the coming quarters" but then"pick up" in the final quarter of 2023.

The index of leading economic indicators, which has been in steep decline and fell a full 1.0 percent in November, is expected to fall a further 0.7 percent in December.

The index of leading economic indicators is a composite of 10 forward-looking components including building permits, new factory orders, and unemployment claims. The report attempts to predict general economic conditions six months out.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the index of leading indicators, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly -- and causing potential inflationary pressures. The index of leading indicators is designed to predict turning points in the economy -- such as recessions and recoveries. More specifically, it was designed to lead the index of coincident indicators, also now published by The Conference Board. Investors like to see composite indexes because they tell an easy story, although they are not always as useful as they promise. The majority of the components of the leading indicators have been reported earlier in the month so that the composite index doesn't necessarily reveal new information about the economy. Bond investors tend to be less interested in this index than equity investors. Also, the non-financial media tends to give this index more press than it deserves.