Conference Board cites consumer pessimism and weak new orders as key drags
A widely followed gauge of future U.S. economic activity declined for the sixth consecutive month in May, reinforcing concerns of a potential economic slowdown. The Conference Board’s Leading Economic Index (LEI) fell 0.1% to 99.0, following a sharply revised 1.4% decline in April—the steepest drop since the onset of the pandemic in 2020.
The May decline, in line with economists’ expectations, was driven by a combination of persistent consumer pessimism, a drop in building permits, weaker manufacturing orders, and a modest rise in jobless claims. Despite a rebound in equity markets, fueled in part by a temporary easing of President Donald Trump’s tariffs, the overall index posted another negative reading.
“With the substantial negatively revised drop in April and the further downtick in May, the six-month growth rate of the Index has become more negative, triggering the recession signal,” said Justyna Zabinska-La Monica, senior manager at the Conference Board. While the group stopped short of forecasting a recession, it warned of significantly slower economic momentum heading into 2025.
Slowdown expected despite stable GDP outlook
The Conference Board projects U.S. real GDP to grow at 1.6% in 2025, a notable deceleration from 2024. Zabinska-La Monica emphasized that the current trend does not indicate a deep contraction, but rather a prolonged period of weaker growth. Persistent tariff impacts, especially those tied to Trump’s ongoing trade policies, could further weigh on the economy into 2026.
This isn’t the first time the LEI has flashed warning signs. During the post-pandemic inflation wave, the index had also pointed to a looming recession, which ultimately did not materialize. Whether the current warning translates into actual contraction remains uncertain.
Tariffs, housing, and labor market remain pressure points
Although markets received a brief lift in May due to policy rollbacks, the structural drags on growth remain entrenched. A continued drop in building permit applications points to housing sector caution, while new orders in the manufacturing sector remain weak. Rising initial claims for unemployment insurance are also beginning to raise flags about the labor market’s durability.
The Conference Board’s latest release suggests businesses and investors should prepare for a low-growth environment rather than a full-blown recession. Still, the index’s prolonged decline and the cumulative impact of tariffs signal that risks are rising, particularly as monetary policy remains restrictive.