US Leading Index rises 0.2% as six-month growth turns positive

The Conference Board's Leading Economic Index rose 0.2% in July, flipping its six-month growth rate positive for the first time in more than four years.

The Conference Board's Leading Economic Index rose 0.2% in July to 99.5, flipping the six-month growth rate positive for the first time in more than four years as AI investment offsets consumer weakness.

"Most components were positive in July except consumer expectations, which continued to be a notable drag on the overall index," said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators at The Conference Board.

The six-month growth rate turned to an increase of 0.2% between January and July, a sharp reversal from the 1.3% contraction over the prior six months. The Coincident Economic Index rose 0.2% to 114.8, expanding 0.5% over the same window after remaining flat previously. The Lagging Index gained 0.2% to 120.4, up 0.8% since January, though downward revisions from April to June left the level below its preliminary June reading of 120.5. Diffusion across the leading index's ten components reached 75.0 in July, up from 60.0 in June.

The Conference Board forecasts real GDP growth of 1.9% in both 2026 and 2027, with expansion driven by business investment in AI while higher living costs weigh on consumer spending, particularly among lower- and middle-income households. The LEI historically leads turning points in the business cycle by around seven months, making the index's sustained improvement a forward signal for the broader economy.

The July reading marked the fourth increase in the past six months, a pattern that has historically preceded sustained expansion. The last time the LEI's six-month growth rate turned positive after a prolonged contraction was more than four years ago, and the index's track record as a cyclical gauge has made it a closely watched input for economists and policymakers.

AI Capex Carries the Cycle as Consumer Expectations Lag

The divergence between business and consumer sentiment is the defining feature of the current expansion. While manufacturers' new orders, building permits, and the S&P 500 index — all components of the LEI — contributed positively in July, consumer expectations for business conditions remained the sole drag. This split reflects a broader economic reality: corporate capital expenditure on AI infrastructure is running at record levels, while households face persistent cost-of-living pressures.

The Conference Board's assessment points to this bifurcation. Growth is expected to be driven by business investments in AI, while the higher cost of living may reduce consumer spending, especially by lower- and middle-income households. The CEI, which tracks current economic conditions, expanded 0.5% over the past six months after remaining flat in the prior period, with all components except payroll employment contributing positively. The CEI's four indicators — payroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial production — are among the data used to determine recessions in the US.

The interest rate spread between 10-year Treasury bonds and the federal funds rate — another LEI component — reflects the Federal Reserve's policy stance and its transmission into the broader economy. With the LEI now pointing to moderate growth, the Fed's path on rates will be closely watched at upcoming meetings. The ISM Index of New Orders and manufacturers' new orders for nondefense capital goods excluding aircraft also contributed to the July improvement, reinforcing the picture of a business-led expansion.

The next LEI release is scheduled for September 18, 2026, at 10 a.m. ET. If the index continues to build on its recent gains, it would reinforce the view that the US economy is entering a period of moderate but durable growth, with the AI investment cycle providing the primary engine.

This article is for informational purposes only and does not constitute investment advice.