The Conference Board Leading Economic Index (LEI), which measures indicators of significant turning points in the business cycle and where the economy is headed in the near term, posted a 0.1% decline for the month of December, reversing course from a 0.4% rise in November—continuing a long-term trend of downward movement.
For the second half of 2024, the LEI declined by 1.3%, a slightly slowed pace from its 1.7% decline in the first half of 2024.
“The Index fell slightly in December, failing to sustain November’s increase,” said Justyna Zabinska-La Monica, senior manager at The Conference Board, in a statement. “Low consumer confidence about future business conditions, still relatively weak manufacturing orders, an increase in initial claims for unemployment and a decline in building permits contributed to the decline.”
Zabinska-La Monica tempered the negative reading though, stating that half of the economic indicators in the LEI actually experienced upward movement, and that there is a somewhat rosier outlook for U.S. GDP for 2025 despite the LEI’s downward movement.
“Still, half of the 10 components of the index contributed positively in December. Moreover, the LEI’s six-month and 12-month growth rates were less negative, signaling fewer headwinds to U.S. economic activity ahead. Nonetheless, we expect growth momentum to remain strong to start the year, and U.S. real GDP to expand by 2.3% in 2025.”
The mixed signals in the LEI mirror the mixed feelings of new homebuilders, who have been discouraged by stubborn mortgage rates that have nearly reached 7%, even as overall homebuilder confidence saw a slight uptick. Homebuilders have also expressed concern over newly proposed tariffs that could cause inflationary pressure.
The Conference Board Coincident Economic Index (CEI), which measures where the U.S. economy is currently, saw a 0.4% rise in December, to a reading of 114.1. The CEI rose 0.9% in the six months preceding December, which was a couple points higher than the 0.7% rise in the six months preceding those.
The CEI’s component indicators—payroll employment, personal income less transfer payments, manufacturing and trade sales and industrial production—are part of the data used to determine recessions in the United States. All of the component indicators saw a rise in December, with the largest contribution coming from industrial production, which was negative in half of the previous six months. The next highest contributions came from personal income less transfer payments, payroll employment and manufacturing and trade sales.
The 10 components of the Leading Economic Index® for the U.S. are:
- 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
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