Economic Signals Point to Tougher 2026 as Confidence Fades

The economy might be hitting the brakes in 2026, and it’s not just one thing causing the slowdown. It’s a bunch of factors piling up at once.

A recent report from The Conference Board shows their Leading Economic Index dropped 0.3% in September, marking the second month in a row of decline. That’s a signal economists watch closely because it often hints at what’s coming down the road.

The big picture? People and businesses are getting more cautious about the future. Consumer confidence is wavering, and companies aren’t placing as many new orders as they used to. Meanwhile, unemployment claims are ticking up, even if it’s just slightly.

What’s Actually Happening

Think of the Leading Economic Index like a weather forecast for the economy. It pulls together 10 different measurements, everything from housing permits to stock prices to what people expect about their financial future.

When most of those signals point in the same direction, it’s worth paying attention. Right now, they’re pointing toward slower times ahead.

The index fell 2.1% between March and September this year. That’s actually faster than the 1.3% drop it saw in the six months before that. The pace is picking up, which is what has economists taking note.

According to The Conference Board’s latest data, the slowdown is expected to show up at the end of 2025 and into early 2026. They’re predicting GDP growth will hit 1.8% this year before sliding to 1.5% next year.

Why This Matters for Regular People

When the economy slows down, it shows up in everyday ways. Companies get more careful about hiring. Raises might be harder to come by. Business owners think twice before expanding.

It doesn’t mean disaster is around the corner. The economy has been through plenty of slow patches before. But it does mean things might feel tighter than they have recently.

Right now, businesses are dealing with tariff changes that make planning harder. Consumer spending, which had been pretty strong through the middle of the year, is starting to lose steam. Add in the recent federal government shutdown that lasted over a month, and you’ve got a recipe for uncertainty.

The Mixed Signals

Here’s where it gets interesting. Not everything in the economy is pointing downward.

Stock prices have been contributing positively to the economic index. That means investors still see opportunities, even with the headwinds. Credit markets also look relatively healthy, suggesting banks are still willing to lend and businesses can still access money when they need it.

Some manufacturers are still getting new orders for big-ticket items like machinery and equipment (excluding aircraft). That’s usually a sign companies are still investing in their future, even if they’re being more selective about it.

The economy isn’t exactly booming, but it’s not collapsing either. It’s more like it’s shifting into a lower gear.

What Experts Are Watching

Justyna Zabinska-La Monica, who tracks business cycles at The Conference Board, pointed out that both consumers and businesses are showing weaker expectations. That matters because when people and companies expect things to slow down, they often adjust their behavior in ways that make it happen.

It’s a bit of a self-fulfilling prophecy. If businesses think demand will drop, they might hold off on hiring. If consumers worry about the economy, they might save more and spend less. Those actions, multiplied across millions of people and thousands of companies, actually do slow things down.

The current data suggests the economy will stay fragile and uneven as everyone adjusts to new tariff policies and softer consumer demand.

Looking at the Bigger Picture

This kind of slowdown doesn’t happen in a vacuum. It’s the result of multiple forces all working at the same time.

Tariffs have been changing how companies source materials and set prices. That creates uncertainty, and uncertainty makes businesses cautious. The federal government shutdown interrupted normal operations for weeks, creating ripple effects across different sectors.

At the same time, consumers are dealing with persistent inflation that has made everything from groceries to gas more expensive over the past few years. Even though wage growth has been decent, people are feeling stretched. When you feel stretched, you pull back on spending that isn’t essential.

The Road Ahead

Growth isn’t expected to fall off a cliff. We’re talking about the difference between modest growth and even more modest growth. But that difference matters when you’re trying to plan your own finances or make big decisions about your career or business.

The Conference Board’s forecast suggests we’ll muddle through the end of this year and the first part of next year before things potentially pick up again. But a lot depends on factors that are still up in the air, like how tariff policies shake out, whether the Federal Reserve cuts interest rates more, and how consumers respond to all the uncertainty.

For now, the message from the economic indicators is pretty clear: buckle up for a bumpier ride ahead, but don’t panic. The economy has weathered slowdowns before and will likely do it again.

What You Can Do

When economists start talking about slowdowns, it’s natural to wonder how it affects your own situation. The truth is, it depends on your circumstances.

If you’re in a stable job in a growing industry, you might not notice much difference. If you’re looking for work or thinking about switching jobs, you might find fewer options than there were a year ago. If you own a business, you might see customers taking longer to make purchasing decisions.

The smartest move in uncertain times is usually the most boring one. Build up your emergency savings if you can, avoid taking on new debt unless it’s necessary, and focus on what you can control rather than worrying about headlines.

Because here’s the thing about economic forecasts: they’re educated guesses based on current trends. Things can change. What matters most is being prepared for different possibilities rather than betting everything on one outcome.

The economy will keep doing its thing, speeding up, slowing down, adjusting to whatever gets thrown at it. Your job is to make sure your own financial situation is solid enough to handle whatever comes next.

This article first appeared on Cents + Purpose.