US LEI down 14.7%, CFNAI-GDP divergence hints at recession; Dallas Fed Manufacturing Index contracts.

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The US Leading Economic Index® (LEI) has dropped 14.7% from its peak in this economic cycle. Historically, such a decline has only occurred during recessions over the past 65 years. The index considers data from the US labor market, manufacturing sector, building permits, S&P 500, and bonds.

The Chicago Fed National Activity Index (CFNAI), designed to gauge overall economic activity and related inflationary pressure, decreased to –0.23 in April 2024 from –0.04 in March. Three of the four broad categories of indicators used to construct the index declined, and all four categories made negative contributions in April. The CFNAI-MA3 (three-month moving average) increased slightly to +0.01 in April. The CFNAI Diffusion Index, another three-month moving average, improved to –0.07. While some indicators improved, production-related indicators contributed negatively, and perceptions of broader business conditions worsened. However, expectations regarding future manufacturing activity improved in January2.

Dallas Fed Manufacturing Index: In January 2024, Texas factory activity contracted after stabilizing in December. The production index, a key measure of state manufacturing conditions, dropped significantly by 17 points to –15.4, marking its lowest reading since mid-2020. Other indicators, such as new orders, capacity utilization, and shipments, also pointed to contraction. Perceptions of broader business conditions worsened, and labor market measures indicated employment declines and shorter workweeks. Despite these challenges, expectations for future manufacturing activity improved.

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