Leading Economic Index Insights

US Leading Index Flashes Warning Sign as Outlook Dims On a day when many around the world are mourning the loss of Pope Francis, the global news cycle keeps moving - a sobering reminder of how life, and markets, rarely pause. The The Conference Board’s Leading Economic Index (LEI) fell 0.7% in March, its steepest monthly drop since last summer and the third straight decline. Over the last six months, the index has declined 1.2%, pointing to a clear slowdown in the forward-looking data. The LEI compiles ten early indicators from jobless claims and building permits to equity prices and manufacturing orders, all designed to predict turning points in the business cycle. In March, consumer expectations deteriorated further, stocks posted their worst monthly slide since 2022, and manufacturing new orders pulled back. These components collectively dragged the index down to 100.5, the lowest level since early in the post-COVID recovery. What makes the LEI uniquely valuable is that it sits between the hard data we trust and the soft data we hear. Labor markets are still strong. Retail sales beat expectations. But confidence is falling fast. This index bridges the two showing early, subtle shifts that often show up in earnings reports or spending behavior weeks later. The Fed doesn’t explicitly set policy based on the LEI, but many of its components help inform the path ahead. The Conference Board has already trimmed its 2025 GDP forecast to 1.6%, reflecting increased pressure from tariffs, tightening credit, and a cloudier global outlook. For business leaders and performance marketers alike, this is a data point worth watching. Consumer pullbacks rarely arrive all at once. They begin as pauses, delays, or smaller baskets (especially in categories like home improvement, travel, and discretionary healthcare). Recognizing those signals early can help adjust messaging, media mix, or conversion strategy before the broader slowdown becomes obvious. At Havas Edge, we track indicators like the LEI not because they make headlines, but because they help us see what’s coming. #economicdata #LEI #consumerbehavior #businesscycle #marketingstrategy

Leading indicators fall, but fall short of recession signal. The Conference Board's Leading Economic Index (LEI) fell again in April, but remains above the level that typically signals a recession. The LEI dropped a sharp 1% below the March level, the largest monthly decline since March 2023. The trailing six-month rate of decline was 2%, still above the 4.1% rate of decline that the Conference Board sees as indicative of a pending recession. Nearly all of the ten components that go into the LEI were negative in April. Deteriorating consumer sentiment continued to be the biggest drag. Another negative factor was new orders. Both hours worked in manufacturing and private home building permits flipped from positive to negative. Weak stock prices also dragged down the overall index. That will of course change next month if recent stock market gains are sustained. As I have noted (many ) times in the past, the LEI has been a poor predictor of the business cycle in the post-pandemic period—in 2023 it signaled a recession that never came—as did some other recession warning measures. Others, such as Chauvet and Piger's econometric recession probability model, have continually (and so far correctly) failed to send recession signals. One closely-watched indicator, the steepness of the interest rate yield curve, also set off recession warning bells during this expansion when short-term rates rose above longer-term interest rate beginning in mid-2022, what's termed an inverted yield curve. The yield curve slope has turned positive since September of last year. There are special features of this expansion that may explain why some measures have generated false recession or expansion signals. For measures like the LEI, the unusual build-up of savings during the pandemic may have sustained consumer spending in recent years, despite weakness in other areas. And the movement back into positive territory for the yield curve appears to be due largely to perceptions of declining US government credit worthiness, exemplified by Friday's downgrading of US debt by Moody's. High inflation expectations may also play a role. This is very different from the situation where anticipated strong growth drives a steepening yield curve and positive outlook. In any event, at this point the data we have indicates an economy that continues to see relatively strong consumer spending and labor market health, even as there is clear pressure on household finances and disruptive effects to businesses and consumers from broad policy uncertainty. Whether that holds up as we get beyond the pre-tariff spending bump and begin to feel the price effects of these levies remains to be seen. Next week we get the crucial report on April income and outlays. That may yet be too soon for us to see whether the economy is beginning to see adverse tariff effects. #LeadingIndicators #LEI #yieldcurve #recession #USCreditDowngrade #tariffs #ConferenceBoard

The Leading Economic Index has never declined this much without a recession. What you’re looking at is the Conference Board’s LEI — a time-tested composite that captures forward-looking economic momentum. And it has now been in persistent, steep drawdown territory for nearly two years. • Current drawdown: –17.3% • Longest and steepest slump since the Global Financial Crisis • Historically, such drops have always preceded recessions Markets may be brushing it off. But history suggests it’s wise not to. If this time is different, it would be the first.