I have previously mentioned Paul Kasriel's work with interest rate spreads and leading economic indicators.
Paul notes that if you don't like the reconfigured LEIs -- and I was critical of the white wash the cheerleaders at the Conference Board did to cover up the inverted yield curve -- you can still derive value from them.
His suggestion: Corroborate the LEI signals by also looking at the negative spread between the yield on the Treasury 10-year security and the federal funds rate (on a four-quarter moving average basis) and a year-over-year contraction in the quarterly average of the CPI-adjusted monetary base.
Let's call these two charts the Kasriel Recession-Warning Indicator:
The 1966 LEI signal was false, but the Rate Spread should have kept you out of trouble.
Regardless, the combo of both of these have flipped negative, suggesting that the economy is slowing down . . .
Recession Imminent? Both the LEI and the KRWI are Flashing Warning (pdf file)
Paul L. Kasriel
Northern Trust March 22, 2007