The Conference Board Leading Economic Index Signals Economic Slowdown in August 2025

US Economic Downturn: Leading Economic Index Analysis

In a concerning development for the US economy, the Conference Board Leading Economic Index (LEI) revealed a 0.5% decline in August 2025. The index, set at 100 for the base year of 2016, now stands at 98.4. This trend follows a modest 0.1% uptick in July, which was originally reported as a decline but has since been revised upward. The LEI has shown a significant drop of 2.8% over the six months from February to August 2025, indicating a more rapid decline compared to the 0.9% contraction experienced in the same period last year.

Justyna Zabinska-La Monica, the Senior Manager for Business Cycle Indicators at The Conference Board, highlighted the severity of the situation, noting, "The decline in August was the largest since April 2025, signaling tougher economic conditions ahead." Among the components contributing to the LEI's drop, only stock prices and the Leading Credit Index provided support, while the yield spread recorded a slight negative contribution—its first such occurrence since April.

The challenge is compounded by persistently weak manufacturing new orders and diminishing consumer expectations. Labor market dynamics are also unfavorable, with an uptick in unemployment claims and a reduction in average weekly manufacturing hours. These elements suggest that overall economic activity is likely to continue its downward trend.

One significant factor driving this economic deceleration has been higher tariffs, which had already curbed growth in the first half of 2025, a trend expected to persist into the latter part of the year and potentially into the first half of 2026. While the Conference Board does not currently predict a recession, it projects a mere 1.6% growth in GDP for 2025, down from 2.8% in 2024.

In contrast, the Conference Board Coincident Economic Index (CEI) slightly increased by 0.2% in August 2025, reaching 115.0. This follows a 0.1% rise in both June and July, with the CEI showing a growth of 0.6% between February and August 2025, albeit down from 0.9% in the previous six months. The CEI comprises four crucial indicators: payroll employment, personal income (less transfer payments), manufacturing and trade sales, and industrial production. In August, all components of the coincident index experienced only marginal improvements, and payroll employment's contribution remained neutral.

Additionally, the Conference Board Lagging Economic Index (LAG) experienced a slight uptick of 0.1% to 120.0, following two unchanged months in June and July 2025. Over the six months from February to August, the LAG grew by 0.7%, significantly higher than the 0.3% increase in the preceding six months.

The trends observed in these indexes underline the complex economic landscape facing the US. The LEI serves as a predictive tool that offers insights approximately seven months ahead of potential changes in the business cycle. The LEI encompasses various components that influence economic conditions, including average weekly hours worked in manufacturing, initial claims for unemployment insurance, new orders for consumer goods and materials, and stock prices.

Conversely, the CEI reflects the present economic situation and is closely correlated with actual GDP performance. The slight increase in the CEI and the marginal growth in the LAG index indicate a mixed economic environment where challenges and improvements coexist, underscoring the need for ongoing monitoring.

Looking ahead, the next release of these economic indicators is scheduled for Monday, October 20, 2025, at 10 A.M. ET, providing further insights into the future trajectory of the US economy. As businesses and policymakers navigate these fluctuations, understanding the implications of these indexes will be crucial for strategic planning and decision-making in the months to come.