A key gauge of future U.S. economic activity, the Conference Board’s Leading Economic Index, plunged 0.7% in March, marking its steepest monthly decline since late 2023 and exceeding economists’ forecasts of a 0.5% drop. The fall reflects growing unease as tariffs loom large over trade flows and business sentiment.
Over the six months ending in March, the index contracted 1.2%, moderating slightly from a 2.3% decline in the prior half‑year period. Conference Board senior manager Justyna Zabinska-La Monica noted that weakening consumer expectations, stock prices and new manufacturing orders drove most of the March downturn.
Market Overview:- Leading Economic Index down 0.7% in March versus consensus for –0.5%.
- Six‑month contraction eased to –1.2% from –2.3% in the previous period.
- Tariff uncertainty weighs heavily on consumer and business confidence.
- Consumer expectations and factory orders showed pronounced weakness.
- Stock market volatility contributed significantly to the index’s slide.
- Data do not yet signal a recession, but downside risks have intensified.
- Further tariff developments could deepen leading indicator declines.
- Policymakers will monitor incoming data for signs of sustained slowdown.
- Business investment may be deferred until trade policy clarity emerges.
- Despite the sharp decline in March, the Leading Economic Index’s six-month contraction eased compared to the previous period, suggesting some moderation in downside momentum.
- The index's drop, while notable, does not yet indicate an imminent recession, allowing policymakers and businesses time to adapt and potentially implement supportive measures.
- Resolution or de-escalation of tariff tensions could quickly lift trade flows and business sentiment, leading to a rebound in key LEI components like factory orders and consumer expectations.
- Stock market volatility can create attractive opportunities for long-term investors, especially if fundamentals stabilize and risk appetite returns with more policy clarity.
- Heightened focus by policymakers on incoming economic data may result in preemptive monetary or fiscal support if further weakness emerges, reducing the risk of a prolonged slowdown.
- The 0.7% drop in the Leading Economic Index—the steepest monthly decline since late 2023—signals intensifying headwinds for growth, especially as tariffs weigh on both business and consumer confidence.
- Weakness in consumer expectations and new manufacturing orders points to broad-based economic softness that could spread to other sectors if uncertainty persists.
- Sustained stock market volatility not only drags down the LEI but also risks eroding household wealth, reducing spending, and deepening the downturn.
- If tariff rhetoric escalates and trade policy remains unsettled, further declines in the LEI are likely, increasing downside risks and the potential for a recession later in the year.
- Ongoing uncertainty may delay business investment and hiring decisions, creating a self-reinforcing cycle of sluggish growth and weak economic sentiment.
Analysts caution that although the index’s drop does not confirm an imminent recession, it underscores material downside risks to growth as trade tensions persist. The interplay between tariff rhetoric and economic sentiment will be crucial in shaping the trajectory of business cycle indicators.
Looking forward, the path of tariff negotiations and central bank policy responses will determine whether the leading indicator stabilizes or continues its slide. Sustained monitoring of LEI components will be essential for anticipating shifts in the U.S. expansion’s momentum.
