The Leading Economic Index declined from December
of ConsumerAffairsHow will the economy fare under the second Trump Administration? It began with a step backward.
The Conference Board reports its Leading Economic Index fell by 0.3% in January to a reading of 101.5, following a modest 0.1% increase in December. This decline reverses most of the gains observed in the previous two months and highlights ongoing economic challenges.
Over the six-month period ending in January, the LEI recorded a 0.9% decline, which is an improvement compared to the 1.7% decline in the preceding six months.
Justyna Zabinska-La Monica, senior manager of Business Cycle Indicators at The Conference Board, noted that consumer pessimism regarding future business conditions and reduced manufacturing work hours contributed significantly to the January decline.
Despite these challenges, there are signs of stabilization, as manufacturing orders have nearly steadied, and the yield spread has positively impacted the index for the first time since November 2022.
Growth rates trending upward
Only four of the LEI's ten components were negative in January, and the index's six-month and annual growth rates continue to trend upward, suggesting milder economic obstacles ahead. The Conference Board forecasts a 2.3% expansion in U.S. real GDP for 2025, with stronger growth anticipated in the year's first half.
But a new administrations economic policies could be a wild card, especially if steep tariffs are widespread. Insurance comparison website Insurify has predicted that 25% tariffs on vehicles imported from Mexico and Canada would lead to a significant increase in insurance rates for U.S. motorists.
Tariffs on steel and aluminum might have the unintended consequence of making cans of beer and soft drinks more expensive. But thats in the future. For now, the economy appears stable.
Current conditions show improvement
In January, The Conference Boards Coincident Economic Index, which reflects current economic conditions, rose by 0.3% to 114.3, maintaining the same growth rate as in December. Over the six-month period from July 2024 to January 2025, the CEI increased by 1.0%, slightly above the previous six months' growth of 0.9%.
All four components of the CEIpayroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial productionimproved in January, with industrial production making the largest positive contribution for the second consecutive month.
Meanwhile, the Lagging Economic Index also showed positive movement, increasing by 0.5% to 119.3 in January, marking the first positive six-month change since summer 2024. This growth indicates a potential shift in economic momentum, as the index had previously shown no change in December.
Overall, while the decline in the LEI points to some economic uncertainty, the positive trends in the CEI and LAG suggest that the U.S. economy may overcome these challenges, with expectations of continued growth in the coming months.
Posted: 2025-02-21 16:45:24
