Declining Trends in the Leading Economic Index (LEI)

The Conference Board’s Leading Economic Index (LEI) for February recorded a decrease of 0.3%. This marks a continuation of its downward trend, following a previously reported decline of 0.2% in January, which was adjusted from an initial estimate of 0.3%.

Over the six months leading up to February 2025, the LEI experienced a cumulative decline of 1%. This rate of decrease is significantly less than the 2.1% drop recorded in the preceding six months (February 2024 to August 2024).

Consumer Sentiment and Economic Outlook

Justyna Zabinska-La Monica, a senior manager at The Conference Board, commented on the implications of these figures, stating, “The U.S. LEI fell again in February and continues to point to headwinds ahead.” She noted a shift towards pessimism among consumers regarding future business conditions, which was the most significant factor contributing to the index’s decline for the month. Additionally, although manufacturing new orders showed improvement in January, they receded in February, further exacerbating the downturn.

Despite the negative outlook, Zabinska-La Monica indicated that the slowdown in the index’s decline is a positive sign. “There is an upward trend in the numbers, despite lower consumer sentiment,” she remarked, highlighting the potential for moderated economic headwinds compared to 2023. Nonetheless, she cautioned that ongoing uncertainties in policy and a decrease in consumer spending could lead to an anticipated real GDP growth rate of around 2% for the United States in 2025.

Home Sales and Federal Reserve Response

Recent trends in pending home sales also reflect the cautious attitudes of consumers, suggesting a reluctance to commit to large purchases under current economic conditions. This hesitance coincides with the Federal Reserve’s decision to maintain interest rates during its latest review, accompanied by a downward revision in GDP projections for the medium term.

The Coincident Index (CEI) Shows Modest Growth

In contrast to the LEI, The Conference Board’s Coincident Index (CEI), which indicates the current economic condition, saw an increase of 0.3% in February, resulting in a reading of 114.7. This follows a 0.2% rise in January. Over the six months leading to February, the CEI rose by 1.2%, double the previous growth rate of 0.6% recorded earlier.

The positive movement in the CEI is supported by improvements in key components—payroll employment, personal income excluding transfer payments, manufacturing and trade sales, and industrial production—all of which saw gains in February, particularly led by a surge in industrial production.

Components of the Leading Economic Index

The LEI is based on ten distinct components, which include:

• Average weekly hours in manufacturing
• Average weekly initial claims for unemployment insurance
• Manufacturers’ new orders for consumer goods and materials
• ISM® Index of New Orders
• Manufacturers’ new orders for nondefense capital goods excluding aircraft orders
• Building permits for new private housing units
• S&P 500® Index of Stock Prices
• Leading Credit Index™
• Interest rate spread (10-year Treasury bonds less federal funds rate)
• Average consumer expectations for business conditions