U.S. Economy Continues Expansion; Business Cycle Index Reaches 15-Month High Despite Mixed Signals

Economic Expansion Continues Through April

The US economy continued to expand in April, with overall conditions improving, as the proprietary Confluence Diffusion Index remained in expansionary territory for the fifteenth consecutive month, with no indicators entering or exiting contraction, leaving three of 11 signals in warning territory. This marks sustained economic resilience despite global headwinds.

Financial Liquidity Strong, Real Economy Mixed

Several areas warrant closer monitoring, as financial conditions point to ample liquidity—particularly within the technology sector—while signals from the real economy remain mixed. The Confluence Diffusion Index for May provides a composite view of the economy based on 11 benchmarks and remains in expansionary territory according to April data, with the index's value unchanged at +0.2121, well above the recovery signal threshold of -0.1000.

Labor Market Shows Momentum Amid Inflation Concerns

The labor market appears to be gaining momentum. However, the index shows that while the overall economic outlook is solid, we have not seen the full impact from the conflict in Iran, with only three of the 11 benchmarks in contraction, unchanged from last month. This report was delayed due to severe data lags caused by the government shutdown, although data for the missing months will not be released, the report is written as if no disruption occurred.

Outlook for Coming Months

The index shows that while the overall economic outlook is solid, we have not seen the full impact from the conflict in Iran. Investors and policymakers are watching closely to see whether inflation pressures moderate and whether the labor market maintains its current trajectory as geopolitical uncertainties persist and energy prices remain elevated.