Leading Economic Index Shows Slight Decline in Economy
Leading Economic Index Experiences Minor Drop
The Conference Board's Leading Economic Index (LEI) for the US has shown a decrease of 0.1%, settling at 101.6 (2016=100) by year-end. This follows a positive adjustment from the previous month, where the index had risen by 0.4% in November. Looking back at the second half of the year, the LEI faced a 1.3% decline, indicating a slight improvement compared to the initial 1.7% drop noted in the first half of the previous year.
Insights on Economic Trends
According to Justyna Zabinska-La Monica, a Senior Manager in Business Cycle Indicators at The Conference Board, "The Index fell slightly in December, failing to maintain the increase observed in November. Factors such as low consumer confidence concerning future business conditions, weak manufacturing orders, rising unemployment claims, and a downturn in building permits have all been contributing factors to this decline." Nonetheless, it's optimistic to note that half of the LEI's ten components positively influenced the index in December.
Coincident Economic Index Shows Growth
The Coincident Economic Index (CEI) witnessed a 0.4% increase in December, reaching 114.1 (2016=100). This follows a modest 0.2% rise in November, marking a total of 0.9% growth over the last six months, slightly ahead of the previous period's growth of 0.7%. The CEI's improvement highlights positive movements in the four components that gauge recessions in the economic cycle, namely payroll employment, personal income less transfer payments, manufacturing, and trade sales, along with industrial production.
Lagging Index Analysis
Meanwhile, the Lagging Economic Index (LAG) also saw a slight rise of 0.1%, positioning itself at 118.5 (2016=100) in December. This is a minor gain following a 0.2% increase in the month before. However, LAG's six-month growth remains negative, at a contraction rate of 0.5% for the last six months of the year, a shift from a 0.8% increase observed earlier in 2024.
Future Projections
Looking forward, experts predict that economic growth will carry momentum into the new year, with an anticipated real GDP expansion of 2.3% for 2025. The next update on the economic indexes will be publicly available on February 20, 2025, at 10 AM ET, where analysts hope to see more signs of recovery and stability in the economic landscape.
Understanding the Indexes
The Leading Economic Index (LEI) and the Coincident Economic Index (CEI) serve as vital tools in analyzing and forecasting economic trends. Comprising multiple indicators, these indexes effectively reveal turning points in the economy far more distinctly than any single component can showcase.
Components of the Leading Economic Index
The LEI's framework includes ten essential components that shape its performance. These components are instrumental in identifying economic fluctuations and include metrics such as average weekly hours in manufacturing, manufacturers' new orders for consumer goods, and building permits for new housing units, among others.
Components of the Coincident Economic Index
Similarly, the CEI encompasses various parameters that depict current economic conditions, including payroll employment and personal income metrics. Tracking these elements closely enables a deeper understanding of the economy's immediate performance.
Frequently Asked Questions
What did the Leading Economic Index indicate for December?
The Leading Economic Index slid by 0.1% to 101.6, marking a slight decline from November’s increase.
How is the Coincident Economic Index performing?
The Coincident Economic Index rose by 0.4% in December, reflecting positive trends in key economic indicators.
What are the future predictions for US GDP growth?
Experts predict a future real GDP growth of 2.3% for 2025, suggesting optimism for the upcoming year.
How do these indexes help understand the economy?
The LEI and CEI provide insights into economic trends and turning points, aiding in effective forecasting and analysis.
When will the next index release occur?
The next economic indexes release is scheduled for February 20, 2025, at 10 AM ET.
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