US Economy Shows Signs of Slowdown as Leading Index Declines for Fifth Straight Month
Modern York – The US economy is signaling a potential slowdown, according to the latest data released by The Conference Board. The Leading Economic Index® (LEI) fell by 0.2% in December 2025, marking the fifth consecutive monthly decline. This continued weakness suggests economic activity may soften in early 2026.
Diverging Economic Signals: LEI, CEI, and LAG
While the LEI points to headwinds, the economic picture isn’t entirely bleak. The Coincident Economic Index® (CEI), which reflects current economic conditions, rose by 0.2% in December. However, the Lagging Economic Index® (LAG) edged down by 0.1%, indicating that past economic strength is beginning to wane.
Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators at The Conference Board, noted the continued softness, but highlighted some positive contributions to the LEI. “Alongside a rise in building permits, positive contributions to the LEI in December were led by the index’s financial components, with the yield spread notably turning positive in both November and December.”
Key Factors Weighing on the LEI
Several factors are contributing to the LEI’s decline. Persistently weak consumer expectations and a softening ISM® New Orders Index are major drags. Labor market data also presents a mixed picture, with an increase in unemployment claims and a decline in average weekly hours in manufacturing.
The ten components of the LEI provide a broad view of the economy. These include average weekly hours in manufacturing, initial unemployment claims, manufacturers’ new orders, the ISM® Index of New Orders, building permits, stock prices, credit conditions, interest rate spreads, and consumer expectations.
Economic Growth Forecasts
The Conference Board projects a slowdown in economic growth, forecasting GDP to expand by 2.1% year-over-year in 2026, slightly down from a forecasted 2.2% in 2025. The LEI’s recent performance supports this cautious outlook.
The CEI: A Snapshot of Current Conditions
The CEI, comprised of payroll employment, personal income, manufacturing and trade sales, and industrial production, offers a more immediate assessment of the economy. While nearly all of its components improved in December, the index’s overall growth has slowed slightly compared to the first half of 2025.
Understanding the Lagging Index
The Lagging Economic Index, which includes indicators like consumer price index and average prime rate, provides a retrospective view of economic activity. Its recent decline suggests that the positive momentum experienced earlier in 2025 is fading.
What Does This Signify for Businesses and Consumers?
The combination of a declining LEI and a slowing LAG suggests businesses should prepare for a more challenging economic environment. Consumers may want to exercise caution with spending and investment decisions. The CEI’s continued, albeit slower, growth offers a glimmer of hope, but the overall trend warrants careful monitoring.
Did you grasp? The Leading Economic Index is designed to anticipate turning points in the business cycle by approximately seven months.
Frequently Asked Questions
- What is the Leading Economic Index (LEI)? The LEI is a composite of ten economic indicators designed to predict future economic activity.
- What does a declining LEI indicate? A declining LEI suggests a potential slowdown in economic growth.
- What is the difference between the LEI, CEI, and LAG? The LEI predicts future conditions, the CEI reflects current conditions, and the LAG confirms past trends.
- Where can I find more information about these indexes? You can access data and further analysis at The Conference Board’s data central.
Pro Tip: Regularly monitoring these economic indicators can help businesses and investors make more informed decisions.
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