The US Economy May Be on a Slow-Down: Signals from the LEI Indicator

In April, the US Leading Economic Index (LEI) experienced a significant decline of 0.6% compared to the previous month, marking the largest drop since October. This suggests that the economy may be slowing down, according to senior manager Justyna Zabinska-La Monica at the Conference Board. Several factors contributed to this decline, including consumers’ negative outlook on business conditions, weaker new orders, a negative yield spread, and a drop in new building permits.

Despite strong economic growth following the lifting of shelter-in-place orders, the index is currently near its pandemic lows. According to Wells Fargo economists Tim Quinlan and Nicole Cervi, the composite index of economic measurements is “out of sync” with the economy due to weak consumer expectations dragging it down. The challenging mix of stubborn inflation and high interest rates has affected both American consumers and businesses, with positive real disposable income growth and elevated corporate profit margins failing to offset additional planning and uncertainty required to accomplish tasks. Overall, this decline in the LEI indicates that softer economic conditions lie ahead for the US economy in the near future.