Leading Indicators Show Decline, Pointing to Economic Softening | Economy

The latest economic data released by the U.S. business organization has revealed a continued decline in the Leading Economic Index (LEI) for the month of April. This marks the third consecutive month of contraction, with a 0.4% drop following a 0.3% decrease in March. The six-month contraction now stands at 1.9%, although this is a smaller decline compared to the previous six months which saw a 3.5% decrease.

Justyna Zabinska-La Monica, senior manager of business cycle indicators at the organization, commented on the latest figures, stating that the decline in the LEI indicates softer economic conditions ahead. Factors contributing to the decline include a deterioration in consumers’ outlook on business conditions, weaker new orders, a negative yield spread, and a drop in new building permits.

Looking ahead, Zabinska-La Monica projected that real GDP growth will slow to under 1 percent over the Q2 to Q3 2024 period due to factors such as elevated inflation, high interest rates, rising household debt, and depleted pandemic savings. Morningstar Chief U.S. Economist Preston Caldwell also weighed in, suggesting that multiple rate cuts may be necessary in the second half of 2024 to combat slowing economic activity.

Despite the concerns over economic headwinds, markets have been optimistic about the possibility of interest rate cuts, with all three major stock indices reaching new highs. However, experts warn that the labor market could slow more than anticipated, leading to a more cautious approach from consumers and impacting overall economic growth.