The Enigma of Economic Indicators: Decoding Mixed Messages

In the intricate world of economics, leading indicators are the compass that guides policymakers, investors, and analysts through the labyrinth of market conditions. Yet, in recent times, these indicators have been sending mixed signals, creating an air of uncertainty and intrigue. When the leading indicators are less clear, it can become harder to plan for your future with certainty. Businesses that are not following the same path as the economic indicators are also left wondering whether they are underperforming the market.

Understanding Leading Indicators

US Industrial Production, the benchmark for the US industrial economy, will trend relatively flat through the remainder of the year.

Looking into next year, we have compiled a list of leading indicators to examine what they are suggesting for 2025 thus far.

Indicating economic rise for 2025:

1. Total Industry Capacity Utilization Rate
2. S&P 500 Stock Price Index
3. M2 Money Supply
4. Truck Transportation Services Revenue
5. Total Personal Consumption Expenditures
6. Corporate AAA Bond Yields Inverted for Price
7. Personal Savings as a Percentage of Disposable Personal Income
8. Total Manufacturing Production Index
9. Total Retail Sales (deflated by the BEA)

Indicating economic decline for 2025:

1. OECD Leading Indicator
2. ISM PMI (Purchasing Managers Index)
3. Single-Unit Housing Permits

The preponderance of evidence suggests that there will be general macroeconomic rise in 2025. Additionally, the above compilation highlights why it is vital to utilize a collection of leading indicators to guide your business. If you rely on less than three leading indicators, you are not protecting yourself from the distortion that naturally occurs in economic indicators.

The Path Forward

Diversification, innovation, and strategic planning are essential to thriving in a dynamic economic environment. Now that you can move into 2025 with confidence that the general macroeconomy will grow, what will you do about it?

Rise is likely to be relatively mild across many industries. Will you also have a mild 2025 or should you be expecting a stronger rate of growth for your business? Accurate forecasting will help you plan your resources with greater certainty, so you can avoid ending up in a situation where your capital is tied up in too much inventory and product is not moving as quickly as you were anticipating for a “growth” year.

If you would like help determining the best collection of leading indicators for your own business or what level of growth to anticipate in 2025, we are here to help.