An early warning that the US economy is running out of steam

In the global economic landscape, the trend of the US economy has always attracted much attention, and key economic data such as the Conference Board Leading indicator monthly rate is like a "barometer" of the economic trend, providing an important basis for people to insight into the future trend of economic activity. The signal released by the monthly leading Indicators of the Conference Board for October, released on November 21, 2024, really makes all walks of life more worried about the outlook of the United States economy, because it clearly shows that the recent momentum of the United States economic growth is insufficient.

What makes the Conference Board's monthly Leading indicator so forward-looking is that it is measured by combining a number of economic variables. From the average manufacturing job week to initial jobless claims, to new orders to building permits, each component shapes the economy in a different way. This time, the indicator shows a lack of growth momentum, which reflects the challenges facing the US economy at multiple levels.

From the perspective of new orders, this can be said to be an early signal of economic vitality. At the moment, new orders continue to be weak across a number of industries, with 11 out of 14 industries in such distress. The decrease in new orders means that the subsequent production plan of the enterprise will be forced to shrink, and the factory operating rate is difficult to maintain a high level, which will affect the operation of the entire industrial chain. Without enough orders, purchases of raw materials will fall, and jobs may be cut with them, and this ripple effect will eventually feed through to the macroeconomic level, dragging down the overall pace of economic growth.

Changes in working hours in manufacturing cannot be ignored. In October, the number of hours worked in U.S. manufacturing fell by the most since December 2023. Manufacturing is an important pillar industry of the economy, and the decline in working hours directly reflects the slowdown in production activity. This may be due to the lack of orders, weak market demand and other reasons leading enterprises to take the initiative to reduce production time, which will further affect the output scale of the manufacturing industry. The decline in manufacturing output not only means that its own economic benefits are reduced, but also has an impact on related transportation, warehousing and other supporting industries, so that the power of economic growth is greatly reduced.

The rise in jobless claims is also a key warning. When more and more people start claiming unemployment benefits, it means that the labor market has loosened up and the employment situation has become grim. On the one hand, the income of the unemployed people will directly inhibit consumer spending, and consumption as an important carriage of economic growth in the United States, once weak, the activity of the entire economy will be greatly affected. On the other hand, enterprises are facing the pressure of layoffs or are themselves cutting jobs, which will make them more cautious in investment and expansion of production, and dare not easily carry out new project layout and capital investment, which is undoubtedly worse for economic growth.

The decline in building permits also reflects economic worries. The construction industry involves many upstream and downstream industries, from building materials production to home sales and so on. The decline in building permits largely indicates that the advancement of real estate and related construction projects has been hindered, and the stagnation of this area will make the related industry's order volume decline, lower revenue, and even the situation of business difficulties, which will greatly affect the activity of the entire economy. Despite external factors such as hurricanes in the southeastern United States, even excluding this temporary disruption, the activity constraints reflected in the building permits data should not be ignored.

To sum up, the lack of economic growth momentum revealed by the October monthly reading of the Conference Board Leading Indicators released on November 21 is not unfounded, and behind it is the real challenges facing the US economy in a number of key sectors. This signal deserves the attention of investors, enterprises and policy makers, all parties need to adjust investment strategies, business direction and macroeconomic policies in a timely manner according to such a trend, to deal with the possible economic slowdown, and strive to let the US economy back to the track of healthy growth, but also have a positive impact on the stable development of the global economy.