The US Leading Economic Index (LEI) for March experienced a -0.7% decline, surpassing the predicted -0.5% drop. This represents the 36th decrease over the past 39 months. Key contributors to this downturn include reduced consumer expectations, the largest stock price decline since September 2022, and softened manufacturing new orders. Despite these challenges, the data does not indicate an immediate recession. The Conference Board has adjusted its US GDP growth forecast for 2025 to 1.6%, projecting effects from prolonged trade conflicts, which might lead to higher inflation, disruptions in supply chains, reduced investments, and a weaker job market.
The Conference Board Coincident Economic Index® (CEI) saw a 0.1% increase to 114.4, building on a 0.3% rise in February. From September 2024 to March 2025, the index grew by 0.8%, surpassing the previous six-month growth of 0.7%. The CEI factors in payroll employment, personal income minus transfer payments, manufacturing and trade sales, and industrial production. Notably, industrial production declined in March for the first time since November 2024.
The Lagging Economic Index
The Conference Board Lagging Economic Index® (LAG) fell by 0.1% to 119.1 after a 0.3% increase in February. Its six-month growth remained at 0.7%, rebounding from a -0.7% prior six-month decline. The data paints a complex picture of the US economic landscape, marked by both progress and hurdles.
What the article lays out is relatively straightforward, though not without its complications. The US Leading Economic Index (LEI) fell more than anticipated in March—dropping by 0.7%, compared to the predicted 0.5%. That marks three consecutive years of predominantly negative readings, which is remarkable in itself. The drop has been driven by waning consumer optimism, the steepest dip in share prices seen since late 2022, and a softening in new orders within the manufacturing sector—areas we monitor closely.
Yet, despite this weakening in forward-looking indicators, there’s no immediate signal of a downturn in the broader economy. That’s an important distinction—momentum is fading, yes, but not crashing. Still, the fact that growth expectations for 2025 have been trimmed to 1.6% reinforces the idea that the economy will likely face external headwinds for a while, particularly from long-running trade disputes. These in turn might feed into persistently higher prices, make sourcing goods trickier, lower business investment, and slow job creation.
Current Economic Indicators
Meanwhile, the Coincident Economic Index (CEI)—which measures where the economy stands today—moved slightly higher, gaining 0.1% after a bigger bump in February. Over the last half year, the lift in CEI has been marginally better than the period before, suggesting continued if modest momentum. The rise comes mainly from gains in employment and incomes, but it’s worth noting that industrial production snapped its recent stretch of growth, posting its first monthly drop since November. That shouldn’t be ignored—it shows the foundations aren’t entirely firm.
The Lagging Index, which typically tells us how pressure points build and eventually show up in broader economic measures, slipped again in March after a modest gain earlier in the year. Despite the drop, the six-month trend has returned to growth, though barely. That turn higher after prior declines reveals that earlier economic strains are beginning to ease—but not quickly.
From here, the tone is mixed, but certainly leaning more cautious than optimistic. The forward indicators lead us to be defensive. Equity price weakness, a shift in order volumes, and stubborn inflation threats stemming from trade disruptions all point to increased volatility. We might view this as an early warning and act accordingly. Short-term positioning should be highly responsive, more tactical than directional. If indicators persist with a negative tilt, risk premiums could widen further and liquidity conditions may deteriorate.
Derivatives traders ought to anticipate higher intraday swings from economic prints and sentiment news. Data points like non-farm payrolls, ISM manufacturing, and monthly CPI releases will likely weigh more quickly and forcefully on implied volatility. We should avoid positioning based solely on rear-view indicators.
Near-term option structures blending gamma exposure with a focus on skew might prove useful, particularly in index derivatives where sensitivity to macro variables remains elevated. For those managing vega, staying light on duration until implieds find a floor could help retain agility. There’s little justification for large-scale directional bets.
Given how markets have responded to similar data patterns historically, we may note that soft leading indicators tend to foreshadow lower real yields and greater curve flattening. That could offer tactical opportunities via rate volatility, especially in the front end of the curve. Floaters may underperform while breakevens remain sticky.
We’re seeing that the economy isn’t falling apart, but signs are building that it’s becoming more fragile. Over the coming weeks, we need to think carefully about how market participants price tightening risks driven not by central bank action, but by rising uncertainty and cost pressures. Keep a close eye on changes in earnings expectations and corporate guidance as well. Share prices, and the volatility built into them, will likely follow these signals with less delay than usual.
