📊 U.S. Economic Indicators Signal Potential Slowdown Amid Trade and Inflation Pressures

After a strong post-pandemic recovery, the U.S. economy is now showing increasing signs of deceleration. Fresh data from The Conference Board has raised red flags for economists, policymakers, and market participants alike. In March 2025, the Leading Economic Index (LEI) fell by 0.7%, marking the latest in a string of declines that suggest the economy may be heading into a prolonged period of slow growth — or worse, a recession.

Slipping Momentum: The LEI Drops Again

The LEI, a composite index made up of ten forward-looking indicators including manufacturing orders, jobless claims, and consumer expectations, is designed to gauge where the economy is heading in the near term. According to The Conference Board, the index fell to 100.5 in March, following a 0.2% decline in February. Over the last six months, the LEI has contracted by 1.2%.

While a single data point doesn’t indicate a crisis, the trend is troubling. Six consecutive months of decline paint a broader picture of economic cooling. In fact, this downward movement in the LEI mirrors the soft patches the U.S. economy experienced before the recessions of 2001 and 2008.

Dana Peterson, Chief Economist at The Conference Board, explained in a statement:

“Persistent weakness in the LEI is consistent with a slower economy in the second half of 2025. The primary drag stems from deteriorating consumer expectations, falling equity markets, and softer demand in the manufacturing sector.”

GDP Growth Outlook Trimmed to 1.6%

In tandem with the LEI report, The Conference Board has also revised its GDP growth forecast for 2025 to 1.6%, down from the earlier 2.0% estimate. This projection aligns with new risks that have emerged in recent months — including higher borrowing costs, weakening global demand, and the lingering effects of U.S. tariffs on imports.

This new estimate falls short of what many economists consider the “potential” growth rate of the U.S. economy — generally pegged around 2%. A 1.6% rate not only indicates a slowdown but also leaves less room to maneuver in case of an external shock or crisis.

The softer growth outlook has immediate policy implications, especially for the Federal Reserve, which has been weighing whether to continue holding interest rates steady or consider modest cuts later in the year.

Consumer Confidence Erodes

As inflation persists and interest rates remain elevated, American consumers are showing signs of strain. The latest surveys from Gallup and the University of Michigan show falling confidence levels, particularly among low- and middle-income households.

More than 60% of respondents now believe it is a bad time to make large purchases, and nearly half worry that their income will not keep up with rising costs. This pessimism is critical: consumer spending drives over two-thirds of U.S. GDP.

Some economists warn that this feedback loop — falling confidence leading to lower spending, which in turn dampens growth — could become self-reinforcing if not addressed through targeted fiscal or monetary stimulus.

Tariffs: The Trade War Hangover

One of the less visible but increasingly impactful drags on the economy is the lingering effect of tariffs imposed during the previous Trump administration. Although some of these measures were rolled back or paused in 2022 and 2023, many remain in place — particularly against China.

Recent tensions have further complicated matters. China and Japan have both expressed concern over America’s trade posture in recent international forums. Meanwhile, American manufacturers and retailers continue to report higher input costs due to the tariffs, which are often passed down to consumers.

In its April report, The Conference Board noted that these trade frictions have contributed to supply chain inefficiencies and reduced business investment — a key pillar of long-term economic growth.

Financial Markets Respond Cautiously

Equity markets have been volatile throughout April, oscillating between optimism about corporate earnings and fear of broader macroeconomic weakness. While major indexes like the S&P 500 and NASDAQ recovered slightly mid-month, they remain on track for their worst April performance in years.

Bond markets, often a more sober barometer of economic sentiment, are flashing warning signals as well. Yields on 10-year Treasury notes have declined amid rising investor demand for safe-haven assets — a classic sign that market participants are bracing for turbulence ahead.

Federal Reserve Under Pressure

With the LEI down and growth projections trimmed, all eyes are now on the Federal Reserve. Chair Jerome Powell has so far maintained a cautious stance, preferring to keep interest rates steady to assess the full impact of past hikes. However, some analysts believe the Fed may have to pivot sooner than expected if signs of weakness persist.

The central bank’s dual mandate — price stability and maximum employment — is increasingly difficult to balance. While inflation has moderated from its 2022 highs, it remains above the Fed’s 2% target. At the same time, wage growth has slowed and job openings have begun to decline, hinting at a cooling labor market.

Political pressure is also intensifying. President Trump, in recent interviews, has softened his criticism of Powell but continues to push for rate cuts, warning that “economic momentum must be preserved heading into the election cycle.”

Economists are split on whether these indicators point to a mild downturn, a full-blown recession, or simply a pause in the post-pandemic recovery. One thing is clear: the economic landscape is shifting.

Business leaders, investors, and policymakers would do well to prepare for a period of heightened uncertainty. Diversifying supply chains, rethinking capital expenditure plans, and focusing on productivity improvements may be critical strategies for weathering the storm.

In the meantime, data watchers will keep a close eye on employment figures, consumer sentiment, and corporate earnings over the coming weeks. These will be the next major clues in determining whether the U.S. economy is simply slowing — or starting to slide.