The Conference Board's US leading indicator index fell by 0.1 percent in May, continuing its downward slide following April's 1.4 percent drop (previously -1 percent), and matching expectations in the Econoday consensus forecast. Over the six-month period between November 2024 and May, the LEI dropped 2.7 percent, a bigger decline than the 1.4 percent decrease over the preceding six-month period.

The Conference Board said the stock market rebound was the main positive contributor, but that consumer pessimism, persistently weak manufacturing new orders, a second straight month of rising first-time jobless claims, and the drop in housing permits dragged the overall index down.

With the substantial negatively revised drop in April and the further downtick in May, the six-month growth rate of the Index has become more negative, triggering the recession signal, it warned.

The Conference Board does not anticipate recession, but we do expect a significant slowdown in economic growth in 2025 compared to 2024, with real GDP growing at 1.6% this year and persistent tariff effects potentially leading to further deceleration in 2026, the report added.

The Conference Board US Coincident Economic Index was up 0.1 percent in May, following a 0.2 percent uptick in April. Overall, the CEI is up 1.3 percent in the six-month period ending in May, more than double the 0.5 percent growth rate over the previous six-month period.

The CEI's componentspayroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial productionare included in the data used to determine recessions in the United States. Industrial production was the weakest contributor to the index in May and the only CEI component declining, the report said.

The Conference Board US Lagging Economic Index rose 0.4 percent in May, following a 0.3 percent increase in April. The LAG's six-month growth rate increased by 0.8 percent over the six-month period ending in May, erasing the 0.3 percent drop for the prior six months.

The consensus forecast looks for a decline of 0.1 percent in May after a big 1.0 percent drop in April on tariff effects.

The index of leading economic indicators is a composite of 10 forward-looking components including building permits, new factory orders, and unemployment claims. The report attempts to predict general economic conditions six months out.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the index of leading indicators, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly -- and causing potential inflationary pressures. The index of leading indicators is designed to predict turning points in the economy -- such as recessions and recoveries. More specifically, it was designed to lead the index of coincident indicators, also now published by The Conference Board. Investors like to see composite indexes because they tell an easy story, although they are not always as useful as they promise. The majority of the components of the leading indicators have been reported earlier in the month so that the composite index doesn't necessarily reveal new information about the economy. Bond investors tend to be less interested in this index than equity investors. Also, the non-financial media tends to give this index more press than it deserves.