The Conference Board’s Leading Economic Index Falls in May, But No Recession in Sight

As the economy continues to navigate through uncertain times, the latest report from The Conference Board has shown a decline in the Leading Economic Index (LEI) for the third consecutive month in May. While this may raise concerns for some, experts are quick to point out that this does not necessarily signal an impending recession for the United States.

Key Takeaways

• The Leading Economic Index fell again in May but “doesn’t currently signal a recession,” The Conference Board said Friday.
• The decline was driven by drops in new business orders, consumer sentiment, and building permits.
• The Conference Board predicts U.S. GDP growth will be less than 1% over the second and third quarters.

Understanding the Numbers

The LEI dropped by 0.5% in May, exceeding expectations and marking a total decline of 2.0% over the past six months. Economists had anticipated a smaller decrease of 0.3% for the month. Justyna Zabinska-La Monica, senior manager of The Conference Board’s Business Cycle Indicators, pointed to specific factors driving this downward trend.

Zabinska-La Monica highlighted a decline in new orders, weak consumer sentiment regarding future business conditions, and lower building permits as key contributors to the decrease in the LEI. Despite these negative indicators, she emphasized that the index does not currently point towards an imminent recession.

Looking Ahead

While acknowledging the challenges posed by high inflation and interest rates impacting consumer spending, The Conference Board projects that real U.S. GDP growth will slow to less than 1% on an annualized basis during the second and third quarters of the year. This cautious outlook reflects the ongoing uncertainties in the economic landscape.

It is important to note that economic indicators such as the LEI provide valuable insights into the health of the economy and help policymakers and businesses make informed decisions. While a decline in the index may raise concerns, it is essential to consider the broader context and not jump to conclusions about the state of the economy.

Conclusion

As the economy continues to face challenges and uncertainties, monitoring key economic indicators like the Leading Economic Index can offer valuable guidance. While the recent decline in the LEI may be cause for caution, experts emphasize that it does not currently signal a recession for the United States.

By staying informed and understanding the factors driving economic trends, individuals and businesses can navigate these uncertain times with greater confidence and resilience. The road ahead may be challenging, but with careful analysis and strategic planning, it is possible to weather the storm and emerge stronger on the other side.

For more information on The Conference Board’s Leading Economic Index and its implications for the U.S. economy, you can visit Investopedia.