The latest data from The Conference Board reveals a continued decline in the US economy's Leading Economic Index (LEI), which fell by 0.3% in June 2025 to 98.8 (2016=100). This marks a substantial 2.8% drop over the first half of the year, a notable acceleration from the 1.3% contraction seen in the latter half of 2024.
Early Indicators Hint at Wider Economic Slowdown
The LEI serves as a forward-looking gauge, anticipating shifts in the business cycle roughly seven months ahead. The key drivers behind the latest decline include weak new manufacturing orders, low consumer expectations, and rising unemployment insurance claims. Although the recent stock market rally has somewhat buoyed the index, it hasn't been enough to counterbalance broader economic headwinds.
The LEI's diffusion index, which tracks the breadth of economic improvement or deterioration across all components, remained below 50 for the third consecutive month, traditionally a recession warning signal. Despite this, The Conference Board currently does not forecast a recession but expects real GDP growth to decelerate to about 1.6% in 2025, partly due to increased tariffs impacting consumer spending in the second half of the year.
Current Economic Conditions Show Modest Strength
Contrasting the leading indicators, the Coincident Economic Index (CEI), which reflects current economic conditions, rose 0.3% in June to 115.1, with improvements noted across payroll employment, personal income excluding transfers, manufacturing and trade sales, and industrial production. The CEI’s modest 0.8% growth over the first six months of 2025 signals some ongoing resilience, albeit slower than prior periods.
Meanwhile, the Lagging Economic Index (LAG), which confirms historical trends, held steady at 119.9 in June and showed a positive six-month growth rate reversal, indicating some delayed compensation for earlier downturns.
The Components Behind the Conflicting Signals
The LEI’s composition includes diverse elements such as average manufacturing hours, building permits, stock prices, credit conditions, interest rate spreads, and consumer expectations. The mixture of negative inputs from manufacturing and consumer sentiment against positive stock market gains and credit indexes illustrates the complexity of the current economic landscape. Similarly, the CEI’s focus on employment and income data signals a cautiously optimistic view of the present economy.
These indexes collectively underscore an economy navigating slower growth amid persistent uncertainties, with businesses and consumers facing the brunt of tariff-related price pressures and labor market fluctuations.
