US Economic Indicator Inches Down Amid Low Consumer Confidence

Workers weld a chassis at a factory in Riverside, Calif., on Sept. 23, 2005. David McNew/Getty Images

The U.S. economy displayed signs of weakness last month, according to a leading economic indicator, but experts pointed to a more positive outlook in 2025, citing factors such as deregulation, improvements in trade, and immigration reforms.

The Conference Board’s Leading Economic Index (LEI) fell by 0.1 percent in December 2024 after a 0.4 percent jump in the previous month, a Jan. 22 statement from the think tank said. LEI provides an early indication of where the economy is heading over the near term. The index fell by 1.7 percent during the first half of 2024 and declined by 1.3 percent over the second half.

Conference Board senior manager Justyna Zabinska-La Monica said the December 2024 readings show the index failed to sustain the jump seen in November 2024. At the time, the gauge had risen for the first time since February 2022.

“Low consumer confidence about future business conditions, still relatively weak manufacturing orders, an increase in initial claims for unemployment, and a decline in building permits contributed to the decline. Still, half of the 10 components of the index contributed positively in December,” she said.

“The LEI’s six-month and twelve-month growth rates were less negative, signaling fewer headwinds to US economic activity ahead. Nonetheless, we expect growth momentum to remain strong to start the year and US real GDP to expand by 2.3% in 2025.”

The United States registered positive GDP growth rates in the first three quarters of 2024. In the first quarter, growth was at 1.6 percent, which rose to 3 percent and 3.1 percent in the two subsequent quarters.

The International Monetary Fund (IMF) has become more optimistic about the U.S. economy. A recent report from the organization forecasts GDP growth this year to be 2.7 percent, higher by 0.5 points from earlier predictions.

The projection partly reflects “carryover from 2024 as well as robust labor markets and accelerating investment, among other signs of strength,” it said.

The IMF said that deregulation could improve confidence and positive sentiment in the United States, boosting both the demand and supply side of the economy.

“While relaxation of unduly tight regulations and reduced red tape for businesses may spur near-term US growth through higher investment, dollar appreciation could fuel risks of capital outflows from emerging market and developing economies,” the organization said in the report.

Policy Changes

A November 2024 survey of 38 professional forecasters conducted by the National Association for Business Economics (NABE) also predicted improvement in the U.S. economy this year.

NABE President Emily Kolinski Morris said that economic projections for 2025 were “higher than their previous projections.” Experts predict 2 percent growth in 2025, up from 1.8 percent predicted in September 2024.

“In addition, the largest share of respondents—44%—now sees the risks surrounding the outlook as balanced, whereas a majority of respondents in the previous survey thought downside risks were more likely than balanced or upside risks,” she said.

Last month, Hussein Malik, head of global research at J.P. Morgan, said he expects “heightened focus” on policy changes in the United States in matters related to trade, regulation, fiscal policy, and immigration.

These changes “should significantly influence” not just the United States but other parts of the world as well, he said.

Dubravko Lakos-Bujas, head of global markets strategy at J.P. Morgan, said the United States “could remain the global growth engine with the business cycle in expansion, a healthy labor market, broadening of AI-related capital spending, and the prospect of robust capital markets and dealmaking activity.”

A key factor for the U.S. economy is inflation. The 12-month annual inflation rate dipped below the 3 percent level in July 2024 and has consistently remained below it.

In December 2024, inflation came in at 2.9 percent. It still remains above the U.S. Federal Reserve’s target of 2 percent. Last month, the central bank suggested it expects fewer rate cuts this year, citing inflation concerns.

When interest rates remain elevated, the financing environment for businesses is more challenging.

In a Jan. 15 post, ING Bank said it has been “predicting three 25bp rate cuts for the year“ and is ”sticking to that view for now.”

“However, it may be that rather than cutting in March as we had been suggesting the first move for 2025 is more likely to happen in June looking at the data right now,” it said.