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US leading economic index falls to lowest level since November 2020

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US economic index signals forthcoming downturn

According to a recent report by The Conference Board, the Leading Economic Index for the US experienced a decline in March, dropping by 1.2% to a reading of 108.4 (2016=100). This is the lowest level the index has seen since November 2020, following a 0.5% decrease in February. The decline is higher than the 0.7% drop that was expected by economists polled by The Wall Street Journal. The report suggests that this is an indication of a forthcoming economic downturn, as the index has been declining every month for the last year, with the last time the series was this negative for this long being from 2007 to 2009.

The Leading Economic Index has shown an overall decrease of 4.5% over the six-month period between September 2022 and March 2023, which is a steeper rate of decline than the previous six months’ contraction of 3.5%. The weaknesses in the index’s components have been widespread in March and have been so over the past six months, pushing the growth rate of the LEI deeper into negative territory. Only stock prices and manufacturers’ new orders for consumer goods and materials have contributed positively over the last six months.

Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, stated that the US LEI’s decline to its lowest level since November of 2020 is consistent with worsening economic conditions ahead. She also noted that the Conference Board predicts that economic weakness will intensify and spread more widely throughout the US economy over the coming months, leading to a recession starting in mid-2023.

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