Leading Economic Index Shows Weakness as Consumer Confidence Falters in July

The latest reading on the leading economic index paints a cautious picture for the U.S. economy. July data revealed a 0.1 percent dip in the headline index, marking a slowdown that tracks with what market watchers had predicted. The underlying trend looks even more concerning: over the first seven months of 2025, the leading economic index has contracted by 2.7 percent—nearly three times steeper than the 1.0 percent decline recorded in the prior six-month window.

What’s Dragging Down Growth Expectations

Two major headwinds are pinning down the index. Consumer sentiment around business conditions has turned notably pessimistic, while new orders data remains stubbornly weak. These twin pressures suggest businesses aren’t confident enough to ramp up production, and households aren’t ready to open their wallets.

There’s one bright spot worth noting: equity valuations. Stock prices have emerged as the primary prop supporting the index, preventing a steeper collapse in forward-looking indicators. This disconnect between equity market buoyancy and weakening economic signals is itself noteworthy.

Labor Market Shows Resilience

Not all signals are gloomy. Initial jobless claims posted a notably sharper improvement in July versus June, placing unemployment insurance metrics as the second-most supportive factor for the leading economic index. This marks a reversal after three months of headwinds from the labor market.

Meanwhile, the coincident economic index—which measures current economic activity—inched up 0.2 percent in July, while the lagging economic index held flat for a second consecutive month, suggesting the underlying economy is grinding forward despite forward-looking uncertainty.