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Newsweek
20-05-2025
- Business
- Newsweek
US Economic Outlook Darkens as Major Forecast Records Steep Drop
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The short-term outlook for the U.S. economy worsened significantly in April, according to the Conference Board's latest Leading Economic Index (LEI). On Monday, the D.C.-based research said that the index—a closely monitored composite of several economic indicators—had fallen by 1.0 percent to 99.4 in April, registering the fifth consecutive monthly decline and the steepest drop since March 2023. Over the six months ending in April 2025, the LEI fell by two percent, matching the pace of decline posted over the previous six months. Why It Matters The sharp decline in the LEI is one of the several warning signals that have emerged from the U.S. economy in recent months against the backdrop of trade policy uncertainty and a related weakening in consumer sentiment. Despite the U.S. and China agreeing to a temporary climbdown on tariffs, set to extend into mid-August, separate consumer surveys suggest that economic anxieties persist. Economists have expressed concerns that the trade dispute may have already done damage to both economies, while cautioning over the strong possibility of a re-escalation. What To Know Seven out of the ten economic components of the LEI declined in April, most significantly consumers' expectations for business conditions. As Justyna Zabinska-La Monica, Senior Manager for Business Cycle Indicators at the Conference Board noted: "Consumers' expectations have become continuously more pessimistic each month since January 2025." According to the University of Michigan's latest Consumer Sentiment Index, consumer sentiment dropped for the fifth consecutive month in May to 50.8, the second-lowest reading on record. Sentiment has dropped by nearly 30 percent since January, with Republicans contributing significantly to the decline seen this month. Meanwhile, year-ahead inflation expectations rose from 6.5 percent in April to 7.3 percent in May, while long-run inflation expectations were pushed up to 4.6 percent, "reflecting a particularly large monthly jump among Republicans." President Donald Trump speaks to reporters as he arrives for a meeting with the House Republican Conference at the Capitol, Tuesday, May 20, 2025, in Washington. President Donald Trump speaks to reporters as he arrives for a meeting with the House Republican Conference at the Capitol, Tuesday, May 20, 2025, in Washington. Rod Lamkey, Jr./AP Photo Many of those surveyed mentioned the impact of tariffs in their responses, though the University of Michigan notes that most were gathered prior to last week's joint announcement of a temporary reduction in tariffs by the U.S. and China. The reaction to this pause assessed so far, it added, "echoes the very minor increase in sentiment seen after the April 9 partial pause on tariffs, despite which sentiment continued its downward trend." While the Conference Board's forward-looking LEI serves as a potential warning signal, the Coincident Economic Index (CEI)—which reflects current conditions—edged up by 0.1 percent in April to 114.8, following a 0.3 percent gain in March. What People Are Saying Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, The Conference Board, said: "The U.S. LEI registered its largest monthly decline since March 2023, when many feared the US was headed into recession, which did not ultimately materialize. "Most components of the index deteriorated. Notably, consumers' expectations have become continuously more pessimistic each month since January 2025, while the contribution of building permits and average working hours in manufacturing turned negative in April. Widespread weaknesses were also present when looking at six-month trends among the LEI's components, resulting in a warning signal for growth." Federal Reserve Chair Jerome Powell, during a press conference on May 7, said: "Despite heightened uncertainty, the economy is still in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our two-percent longer-run objective." Powell continued: "The new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. The tariff increases announced so far have been significantly larger than anticipated. All of these policies are still evolving, however, and their effects on the economy remain highly uncertain." Political economist Veronique de Rugy told Newsweek that despite the 90-day pause in U.S.-China tariffs, "the economic disruptions caused by the trade war have had tangible impacts, and the temporary nature of the agreement means that uncertainties persist." Sean Metcalfe, associate director at Oxford Economics, said: "The effective tariff rate is still noticeably higher than that seen prior to President Donald Trump's inauguration. Over the span of several weeks, the US effective tariff rate skyrocketed to its highest since the late 1890s before settling slightly lower at a rate comparable with the 1930s. The bottom line is the US economy is still going to take a hit from the tariffs that remain in place." Metcalfe told Newsweek that the tariff de-escalation would "boost GDP growth this year (relative to our previous forecast) by several 10ths of a percentage point, reduce the boost to y/y growth in consumer prices from tariffs by 0.2ppts, and nudge the unemployment rate lower by 0.1ppt-0.2ppts." What Happens Next? The Conference Board currently projects U.S. GDP to increase by 1.6 percent in 2025, slowed from 2.8 percent in 2024. It cited the adverse impacts of tariffs on America's growth prospects, with Zabinska-La Monica saying that the "bulk" of these will be felt in the third quarter of the year.
Business Insider
22-04-2025
- Business
- Business Insider
Leading Economic Indicators Signal Slower Growth Ahead
The Conference Board released its Leading Economic Index (LEI) for March 2025. The index declined by 0.7%, dropping to 100.5 (2016=100). This follows a revised 0.2% decrease in February, indicating potential economic challenges on the horizon. While the six-month contraction rate has improved, falling 1.2% through March compared to a 2.3% drop in the previous six-month period, the overall trend suggests economic momentum is waning. Stay Ahead of the Market: Discover outperforming stocks and invest smarter with Top Smart Score Stocks. Filter, analyze, and streamline your search for investment opportunities using Tipranks' Stock Screener. About the Leading Economic Index The LEI is a forecasting tool frequently used to anticipate turning points in the business cycle by about seven months. It combines ten economic indicators designed to signal changes in economic conditions before they become widely apparent: Manufacturing hours and new orders Unemployment insurance claims Building permits Stock market performance Interest rate spreads Consumer expectations Credit conditions These indicators offer investors, businesses, and policymakers valuable insights for planning purposes. The recent decline suggests caution, particularly regarding sectors sensitive to trade policies and consumer confidence. The Latest Index Results 'March's decline was concentrated among three components that weakened amid soaring economic uncertainty ahead of pending tariff announcements,' explained Justyna Zabinska-La Monica, Senior Manager of Business Cycle Indicators at The Conference Board. These key areas of concern include declining consumer expectations, the largest monthly stock price drop since September 2022, and softening manufacturing orders. Despite these warning signs, Zabinska-La Monica emphasized that 'the data does not suggest that a recession has begun or is about to start.' However, The Conference Board has revised its 2025 GDP growth forecast downward to 1.6%. This reduced growth projection largely reflects anticipated impacts from deepening trade wars, which could trigger higher inflation, supply chain disruptions, reduced investment and spending, and a weakening labor market. While the data points to slowing economic activity rather than imminent recession, the cumulative effect of multiple declining indicators signals that growth challenges may persist through 2025, especially if trade tensions continue to escalate. Key Takeaways The recent decline in the Leading Economic Index suggests the economic landscape faces challenges. Although this does not signify an imminent recession, slowing economic momentum indicates growth challenges, particularly with ongoing trade tensions and their potential economic impact. With a revised GDP growth forecast of 1.6% for 2025, stakeholders should prepare for further uncertainties from the economic environment.
Associated Press
21-04-2025
- Business
- Associated Press
The Conference Board Leading Economic Index® (LEI) for the US Fell in March
NEW YORK, April 21, 2025 /PRNewswire/ -- The Conference Board Leading Economic Index® (LEI) for the US declined by 0.7% in March 2025 to 100.5 (2016=100), after a decline of 0.2% (revised up from –0.3%) in February. The LEI also fell by 1.2% in the six-month period ending in March 2025, a smaller rate of decline than its –2.3% contraction over the previous six months (March–September 2024). 'The US LEI for March pointed to slowing economic activity ahead,' said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. 'March's decline was concentrated among three components that weakened amid soaring economic uncertainty ahead of pending tariff announcements: 1) consumer expectations dropped further, 2) stock prices recorded their largest monthly decline since September 2022, and 3) new orders in manufacturing softened. That said, the data does not suggest that a recession has begun or is about to start. Still, the Conference Board downwardly revised our US GDP growth forecast for 2025 to 1.6%, which is somewhat below the economy's potential. The slower projected growth rate reflects the impact of deepening trade wars, which may result in higher inflation, supply chain disruptions, less investing and spending, and a weaker labor market.' The Conference Board Coincident Economic Index® (CEI) for the US increased by 0.1% in March 2025 to 114.4 (2016=100), after a 0.3% increase in February. The CEI rose by 0.8% over the six-month period between September 2024 and March 2025, up slightly from its 0.7% growth over the previous six months. The CEI's four component indicators—payroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial production—are included among the data used to determine recessions in the US. Industrial production, which has declined for the first time since November of 2024, was the only negative contributor in March. The Conference Board Lagging Economic Index® (LAG) for the US decreased by 0.1% to 119.1 (2016=100) in March 2025, after a 0.3% increase in February. Despite the monthly downtick, the LAG's six-month growth rate remained positive at 0.7% between September 2024 and March 2025—a reversal of its –0.7% decline over the previous six months (March–September 2024). The next release is scheduled for Monday, May 19, 2025, at 10 A.M. ET. About The Conference Board Leading Economic Index® (LEI) and Coincident Economic Index® (CEI) for the US The composite economic indexes are key elements in an analytic system designed to signal peaks and troughs in the business cycle. Comprised of multiple independent indicators, the indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI reflects current economic conditions and is highly correlated with real GDP. The LEI is a predictive tool that anticipates—or 'leads"—turning points in the business cycle by around seven months. The ten components of the Leading Economic Index® for the US are: The four components of the Coincident Economic Index® for the US are: To access data, please visit: About The Conference Board The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Ahead™. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. View original content to download multimedia: SOURCE The Conference Board
