While talk of a possible U.S. recession has cooled in recent weeks, leading economic indicators suggest a downturn may still be on the horizon.
Specifically, the Conference Board’s Leading Economic Index (LEI), a composite gauge of 10 forward-looking data points that often signal turning points in the economy, fell by 0.1% in May. This marks the sixth consecutive monthly decline, according to data shared by financial market commentary platform The Kobeissi Letter in an X post on June 24.
More worrying, the LEI has now dropped in 37 of the last 39 months, one of the longest streaks on record.
On a six-month annualized basis, the LEI’s growth rate has declined by roughly 5%, pushing it into a range that historically points to an impending recession.
The index is now down about 16% from its most recent peak and at its lowest level in nine years, a troubling sign given that sustained declines of this magnitude have preceded every U.S. recession since 1960.
It’s worth noting that economists often view the LEI as an early warning system because it tracks a diverse set of components, including stock prices, new manufacturing orders, jobless claims, and consumer expectations.
When the LEI deteriorates for a sustained period, it’s a strong signal that future economic activity will likely contract.
Declining recession odds
Earlier this year, recession fears spiked after President Donald Trump’s trade tariffs led many economists to project that the U.S. might plunge into a downturn.
However, with new trade deals struck with most countries, including China, the odds of a recession have been revised downward, led by entities like JPMorgan.
As a result, prediction markets on Polymarket now place the chance of a U.S. recession in 2025 at just 28%, down from a peak of 66% in April.
However, as Finbold reported, economist Steve Hanke maintains a 90% probability of a recession in 2025. Citing the long-term impact of trade tariffs, he expects the downturn to hit in the year’s second half, pointing to a shrinking money supply and growing policy uncertainty.
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