According to the latest data, the U.S. Leading Economic Index (LEI) fell 0.5% month-on-month to 99.7 points in September, the second consecutive month of decline after a 0.3% decline in August.Over the past six months, LEI has dropped by 2.6%, higher than the 2.2% decline between September 2023 and March 2024.As an important indicator for predicting turning points in the economic cycle, the continued decline in LEI has raised concerns about the short-term economic outlook.

Key reasons for the decline

The weak performance of LEI in September was caused by a combination of factors:

1. New factory orders: The slowdown in global manufacturing has had a significant impact on new orders from U.S. factories, which has become the main drag on the decline in LEI.
   

2. Yield curve inversion: The yield curve continues to be inverted and is often seen as a signal of recessionary pressure.
   

3. Building permits: The decline in the number of building permits, a leading indicator of future building activity, further exacerbates downward pressure on LEI.
   

4. Consumer confidence: Consumers are more cautious about future economic conditions, reflecting concerns about the direction of the economy.
   

Although there were some positive signs in other LEI indicators, they were not enough to offset the overall weak performance.Justyna Zabinska-La Monica, senior manager of the Conference Committee, pointed out that these indicators are consistent with their expectations for moderate economic growth from the end of 2024 to the beginning of 2025.

Synchronized Economic Indicators Grow Modestly

Unlike the decline in LEI, the Synchronized Economic Index (CEI), which reflects current economic conditions, rose 0.1% month-on-month to 112.9 points in September, continuing the 0.2% increase in August.Over the past six months, CEI has grown by a cumulative 0.9%, up from the 0.5% increase in the previous six months.

Growth in CEI was mainly driven by increased employment, growth in personal income (excluding transfer payments), and improvements in manufacturing and trade sales.These factors offset the decline in industrial production, indicating that the overall economy remains relatively stable despite weak LEI performance.

Lagged Economic Index Signals Caution

The Conference Board's lagging economic index (LAG) fell 0.3% in September to 118.9 points after showing no change in August.In the past six months, LAG has fallen by 0.2%, reversing the 1.1% increase in the previous six months.The decline in LAG suggests that economic momentum is weakening, further exacerbating concerns about economic slowdown reflected in the LEI.

Economic Outlook

The continued decline in LEI, especially in key areas such as new orders and the yield curve, suggests that economic growth is slowing.Although the synchronized economic index shows that the current economy remains stable, the risk of recession still exists.Data shows that economic growth will slow down for the rest of 2024 and early 2025, and investors and companies need to remain cautious.