7 Winning Indicators Lift Economic Outlook Out of 4-Year Slump

The Conference Board announced on August 20 that the Leading Economic Index (LEI) experienced a positive six-month growth rate for the first time in over four years. The LEI's growth rate for the period from January to July turned positive, with an increase of 0.2%, while the previous six-month period saw a decline of 1.3%, the organization reported.

Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, stated that this positive trend suggests moderate growth ahead. However, this growth is expected to be driven by business investments in artificial intelligence (AI), while the higher cost of living may dampen consumer spending, particularly among lower- and middle-income households.

The organization forecasts real GDP growth of 1.9% for both 2026 and 2027. In July, the LEI increased by 0.2%, with seven out of its 10 components registering gains. This marks the fourth consecutive increase in the LEI over the past six months. However, July also saw a turnaround from June, when the LEI experienced a revised decline of 0.1%.

The LEI consists of multiple independent indicators designed to forecast turning points in the business cycle about seven months in advance. Of the 10 components of the LEI, seven were positive in July, driven by jobless claims, building permits, the interest rate spread, the Leading Credit Index, the ISM New Orders Index, the S&P 500 Index, and manufacturers' new orders for consumer goods and materials.

Meanwhile, average weekly hours in manufacturing remained unchanged. Consumer expectations for business conditions and manufacturers' new orders for nondefense capital goods, excluding aircraft, were down in July, but this was more than offset by the other components of the index. The University of Michigan's preliminary sentiment index also dropped to 51 in August from 55.2 in July, indicating darker consumer sentiment.