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The Conference Board Leading Economic Index (LEI) dropped by 0.7% in May to 106.7, after decreasing 0.6% in April. Over the past six months starting in November of last year, the index declined 4.3%, a higher rate than the 3.8% decrease in the previous six-month period. 

This is the 14th month of consecutive decreases in the index, suggesting that economic activity will weaken in the coming months. 

“The US LEI continued to fall in May as a result of deterioration in the gauges of consumer expectations for business conditions, ISM® New Orders Index, a negative yield spread, and worsening credit conditions,” said Justyna Zabinska-La Monica, Senior Manager of Business Cycle Indicators at The Conference Board. “Rising interest rates paired with persistent inflation will continue to further dampen economic activity.” 

The Coincident Economic Index (CEI) rose 0.2% to 110.2 in May, bringing its six-month increase to 0.8%. Sales, employment, and income growth were the positive contributors among the CEI’s component indicators, while industrial production had a negative impact on the index in May.

The Lagging Economic Index inched up 0.1% to 118.4 in May, and the index has increased 0.6% over the past six months.

“While we revised our Q2 GDP forecast from negative to slight growth,” Zabinska-La Monica added, “we project that the US economy will contract over the Q3 2023 to Q1 2024 period. The recession likely will be due to continued tightness in monetary policy and lower government spending.”