Leading US Economic Index Increases for 1st Time in 2 Years

Construction workers work on the roof of a house being built in Alhambra, Calif., on Sept. 23, 2024. Frederic J. Brown/AFP via Getty Images

The U.S. economy is expected to show signs of growth in the coming months after a key indicator of future economic direction turned positive.

The Conference Board Leading Economic Index (LEI) for the United States rose by 0.3 percent in November, following a 0.4 percent decline in the previous month, the company said in a Dec. 19 statement.

Justyna Zabinska-La Monica, senior manager at The Conference Board, said this was the first time since February 2022 that the LEI increased monthly. The November jump was driven by a “rebound in building permits, continued support from equities, improvement in average hours worked in manufacturing, and fewer initial unemployment claims,” she said.

While The Conference Board is forecasting 2024 GDP to expand by 2.7 percent, it expects the growth to slow to 2 percent in 2025.

With the November surge, LEI “no longer signals an impending recession,” according to The Conference Board.

The Coincident Economic Index, which reflects current economic conditions in the United States, increased by 0.1 percent in November. The index has been rising at the same rate every single month since July.

The Bureau of Economic Analysis recently estimated the U.S. GDP to have expanded by 3.1 percent in the third quarter of this year, higher than the initial 2.8 percent projections.

This marks the second consecutive period that the quarterly GDP rate was higher than the prior quarter. GDP rose by 1.6 percent in the first quarter, followed by 3 percent in the second.

While GDP estimates have improved, inflation remains a cause of concern. After dipping to 2.4 percent in September, the 12-month CPI inflation increased for two continuous months, hitting 2.7 percent in November.

Sticky inflation poses a problem to businesses, negatively affecting the economy. About 55 percent of small businesses cited inflation as their biggest challenge, according to a third-quarter survey conducted by the U.S. Chamber of Commerce.

“Other concerns don’t come close to inflation unease,” the group said.

Elevated inflation rates also make it difficult for the Federal Reserve to bring down its benchmark rates substantially. This keeps borrowing costs high, thus discouraging business investment and consumer spending activity.

2025 Forecast

The outlook for the United States’ economic performance in 2025 remains mixed as markets await the new policies promised by the incoming Trump administration.

A Nov. 27 S&P Global report warns that “a second Trump administration is already moving the macro-financial needle and raising downside risks for the global economy.”

“Our preliminary policy read on the new U.S. administration is that positive growth effects will be minimal, inflation pressures will rise, and the Fed is likely to stop cutting rates earlier. This will lead to tighter financial conditions, a stronger dollar, and a more complicated macroeconomic picture elsewhere,” the report states.

Goldman Sachs disagrees with such a view, saying it expects the U.S. economy to “outperform” expectations in 2025, according to a Nov. 20 report.

David Mericle, chief US economist at Goldman Sachs Research, cited three key Trump policies expected to affect the U.S. economy: tariff increases on Chinese imports, the tightening of immigration policy, and the extension of the 2017 tax cuts.

While policy changes under Trump are expected to be significant, Mericle predicts they will not “substantially alter the trajectory of the economy or monetary policy.”

“The US economy is in a good place,” he said. “Recession fears have diminished, inflation is trending back toward 2%, and the labor market has rebalanced but remains strong.”

Goldman Sachs predicted only a 15 percent chance of a recession hitting the United States by November 2025. It expects GDP to grow by 2.5 percent next year.

“Consumer spending should remain the core pillar of strong growth, supported both by rising real income driven by a solid labor market and by an extra boost from wealth effects,” Mericle said. “And business investment should pick back up even as the factory-building boom fades.”