The Leading Economic Index (LEI) fell by 0.1% in May while the April reading was lowered to -1.4% from -1.0%, reported The Conference Board on Friday. The LEI tracks ten components, like weekly initial jobless claims and consumer sentiment, in order to provide an economic outlook and an early indication of turning points in the business cycle.
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Through the six months ended May, the LEI has now declined by 2.7%, triggering a recession signal in the process. The signal is triggered when the LEI’s annualized six-month growth rate drops below 4.1% and when the six-month diffusion index reaches or drops below 50. The diffusion index tracks the extent of decline within the LEI’s components.
The Conference Board Eases Recession Fears
Despite the signal, the Board doesn’t forecast a recession. However, the research firm expects “a significant slowdown in economic growth in 2025 compared to 2024, with real GDP growing at 1.6% this year and persistent tariff effects potentially leading to further deceleration in 2026.”
The Board added that weakness in the labor and housing markets, as well as consumer pessimism, has contributed to the index’s weak six-month performance.
Another recession indicator to keep in mind is two negative quarters of gross domestic product (GDP) growth. GDP fell at an annualized rate of 0.2% in Q1.
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