US Leading Economic Index Decline Signals Economic Weakness Ahead

On August 21, 2025, the Conference Board reported a slight decline in the Leading Economic Index (LEI) for the United States, which decreased by 0.1% in July, reaching a level of 98.7 (with 2016 as the base year). This follows a drop of 0.3% in June and a more substantial decline of 2.7% over the past six months from January to July 2025. This trajectory represents a substantial acceleration from the previous six-month decline of 1.0% from July 2024 to January 2025.

According to Justyna Zabinska-La Monica, Senior Manager for Business Cycle Indicators at the Conference Board, the decrease in the LEI is attributed to pessimistic consumer expectations regarding business conditions and weak new order statistics. However, stock prices provided some support as a positive influence on the index. Notably, initial claims for unemployment insurance were significantly lower in July compared to June, marking a positive rebound after several prior months of negative contributions. Despite the improvement in the LEI's six-month growth rate, it remains in negative territory, thus triggering a recession signal once again.

Currently, the Conference Board does not predict an immediate recession, though it anticipates a weakening economy in the latter half of 2025, primarily due to the anticipated negative impacts of tariffs becoming more apparent. Projections indicate that the real GDP is expected to grow by 1.6% year-on-year in 2025, which is a precursor to a slowdown to 1.3% in 2026.

The Coincident Economic Index (CEI) for the US saw a marginal increase of 0.2% in July, bringing it to 114.9, with the growth continuing from earlier months. Between January and July 2025, the CEI recorded an increase of 0.9%, which is an improvement from the previous six-month growth of 0.6%. This index reflects real-time economic conditions and is highly correlated with GDP.

All components of the CEI, apart from industrial production, showed improvement in July, reinforcing the notion that despite the LEI's downward trend, some economic metrics are still on an upswing. Meanwhile, the Lagging Economic Index (LAG) held steady at 119.9 from June and July.

These composite economic indexes are instrumental in identifying turning points in the business cycle, and they incorporate a range of indicators to provide a more comprehensive view of economic trends. The leading index, in particular, serves as a predictive tool intended to signal forthcoming changes in the economic landscape approximately seven months in advance.

Key components of the LEI include average weekly hours in manufacturing, new orders in the manufacturing sector, building permits for new private housing units, and the S&P 500 Index of stock prices, among others. In contrast, the CEI includes payroll employment, personal income excluding transfer payments, manufacturing sales, and industrial production data.

As the next release of these indexes is scheduled for September 18, 2025, stakeholders and economic analysts alike will be keen to monitor these trends closely to assess the health and trajectory of the US economy as it navigates through potential fluctuations in the coming months.