It is a composite of ten leading economic indicators that forecast future economic conditions.
A warning signal (the dark blue line) is triggered when the six-month diffusion index goes below 50. The diffusion index is the proportion of the ten leading economic indicators in the index that are increasing, so when it falls below 50 percent a majority of the leading indicators are decreasing.
When the Index's 6-month growth rate goes below the median decline of -4% and the six-month diffusion index falls below 50 percent a recession signal (red line) is triggered.
We triggered a recession signal this month. As you can see looking at the previous recessions, a recession signal tends to precede a recession in the near future. In fact, this signal has always preceded a recession going back to the 1960s.
This is why the Conference Board expects a recession by the end of the year.