US LEI declines for second month of September, fueling fears of recession in 2025

• New orders from the factory: The continued decline in new manufacturing orders, which has been heavily impacted by the global manufacturing slowdown, remains a significant drag on the index.
• Inverted yield curve: The yield curve remained inverted, which often indicates recessionary pressure.
• Construction permits: A decline in building permits, a leading indicator of future construction activity, further contributed to the decline in LEI.
• Consumer Sentiment: Consumer views on future business conditions were subdued, reflecting cautious sentiment about the economic trajectory.

Although there were some positive changes in other components of the LEI, they were not enough to counterbalance the prevailing weakness. Justyna Zabinska-La Monika, senior manager at The Conference Board, noted that these figures are in line with expectations of moderate economic growth in late 2024 and early 2025.

Coincident Economic Index Shows Modest Growth

In contrast to the LEI, the Conference Board’s Coincident Economic Index® (CEI), which measures the current state of the economy, rose 0.1% to 112.9 in September. This followed a 0.2% rise in August. The CEI rose 0.9% in the six months ended September, an improvement from the 0.5% rise seen in the previous six months.

The key drivers of CEI growth were wage employment, personal income (excluding transfer payments), and manufacturing and trade. These figures helped offset the decline in industrial production, reflecting a relatively stable economic situation despite concerns raised by the LEI.

Lagging index also signals caution

The Conference Board’s LAG index fell 0.3% in September to 118.9 after remaining unchanged in August. Over the past six months, LAG has fallen 0.2%, reversing the 1.1% rise in the previous six-month period. A decline in LAG signals that the economy is losing momentum, adding to the concerns flagged by the LEI.

Economic forecast

The persistent decline in LEI, especially in important areas such as new orders and the yield curve, suggests that economic growth is slowing. While the Coincident Economic Index indicates the economy remains stable for now, recession risks remain elevated. The data points to a period of slower growth for the remainder of 2024 and early 2025, with investors and businesses needing to remain cautious.

Forecast: Bearish

The persistent decline in the LEI and signs of softening in the lagging index suggest a bearish outlook for the economy in the short term. While the Coincident Index shows some resilience, the overall trend points to slower growth and increased risks of recession in 2025.