Economic growth signal rises for first time since 2022: Conference Board

Dive Brief:

A signal of future U.S. economic growth rose in July for the first time in four years, spurred by improved credit markets, rising stock prices, gains in new orders for manufactured goods and other data indicating increasing demand, The Conference Board said Thursday.
A slump in consumer expectations for business conditions was the only component of the Leading Economic Index that fell last month, The Conference Board said. The LEI’s six-month growth rate edged up 0.2% after falling 1.3% during the previous six months. The LEI in July also rose 0.2%, recovering from a 0.1% decline in June.
The rebound in the six-month LEI growth rate suggests “moderate growth ahead,” Justyna Zabinska-La Monica, The Conference Board’s senior manager for business cycle indicators, said in a statement. “The economy should keep expanding,” she said, while noting that consumer expectations “continued to be a notable drag on the overall index.”

Dive Insight:

Gross domestic product will likely grow 1.9% in both 2026 and 2027, The Conference Board said, a dip from the 2.1% pace last year.

GDP increased at an annual rate of 1.5% during the second quarter, slowing from 2.1% growth during the first three months of the year, according to the Bureau of Economic Analysis.

“The economy should keep expanding, but 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,” Zabinska-La Monica said.

Estimates for U.S. business investment in AI this year range from $280 billion to $581 billion, depending on which categories of AI software, services and infrastructure are included in calculations.

Manufacturing is also driving gains in GDP. Output grew at a steady pace last month as production of computers, machinery and other business equipment offset slowdowns in categories including motor vehicles and clothing, the Federal Reserve said Tuesday.

Both manufacturing and industrial production expanded 0.2% in July after 0.3% growth in June, the Fed reported. During the 12 months through July, total industrial production rose 1.1%.

Gloomy consumer expectations may slow GDP growth in coming months, Zabinska-La Monica said.

“The higher cost of living may reduce consumer spending, especially by lower- and middle-income households,” she said.

Consumer sentiment fell 8% this month after two straight months of improvement, according to Joanne Hsu, director for surveys of consumers at the University of Michigan.

“Large reductions were seen among older consumers, lower-income consumers and those without a college degree,” Hsu said on Aug. 14.

Consumer expectations for business conditions fell 11% for the short run and 17% for the long run, Hsu said.

Households spent less last month at auto dealerships, furniture stores, restaurants and other retailers. Retail sales in July fell 0.6%, well short of forecasts, after a 0.2% increase in June, the Census Bureau reported on Aug. 14.

Sales at gas stations and auto dealers decreased 0.9% and 2%, respectively, the Census Bureau said, with lower gas sales reflecting cheaper prices at the pump. Even excluding those two volatile categories, however, retail sales declined.