2025 Economic Outlook: Leading Economic Index Inches Down
Investors should closely monitor the 2025 Economic Outlook, including the Conference Board's Leading Economic Indicators (LEI), as they provide valuable insights into the economy's current and future performance.
The LEI, comprising metrics such as jobless claims, manufacturing orders, and consumer sentiment, is designed to forecast economic trends over the next six to nine months, enabling investors to anticipate market movements and adjust strategies proactively.
The Coincident Index offers a snapshot of the economy's present condition by tracking metrics like employment and industrial production, helping to confirm the current phase of the economic cycle.
The Lagging Index, which includes factors such as unemployment duration and business inventories, helps investors validate trends and assess the economy's recent trajectory.
Together, these indexes serve as a comprehensive toolkit for informed decision-making, helping investors navigate market uncertainties and optimize portfolio allocations.
Leading Economic Index Inches Down
The Conference Board Leading Economic Index for the US inched down by 0.1% in December 2024 to 101.6 (2016=100), after an upwardly revised increase of 0.4% in November. The LEI declined by 1.3% over the second half of 2024, slightly less than its 1.7% decline over the first half of last year.
“The Index fell slightly in December, failing to sustain November’s increase. 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. Still, half of the 10 components of the index contributed positively in December. Moreover, the LEI’s six-month and twelve-month growth rates were less negative, signaling fewer headwinds to US economic activity ahead. Nonetheless, we expect growth momentum to remain strong to start the year and US real GDP to expand by 2.3% in 2025.”
The Conference Board Coincident Economic Index for the US rose by 0.4% in December 2024 to 114.1 (2016=100), following a 0.2% increase in November. As a result, the CEI increased by 0.9% in the six-month period ending December 2024, slightly higher than 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. They all improved in December, with the largest positive contribution coming from industrial production, which contributed negatively in three out of the past six months.
The Conference Board Lagging Economic Index for the US increased by 0.1% to 118.5 (2016=100) in December 2024, after an increase of 0.2% in November. However, the LAG’s six-month growth rate remained negative at 0.5% over the second half of 2024, a partial reversal from its 0.8% increase over the first half of 2024.
More Data Later in the Week
More economic data will be released later this week, including Jobless Claims and the Kansas City Fed Manufacturing Index on Thursday and Consumer Sentiment and Existing Home Sales on Friday.
Sources: conference-board.org
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