The U.S. economy is showing signs of an impending recession, as indicated by the latest decline in the leading economic index (LEI). The LEI, which forecasts the economy’s direction based on 10 key indicators, fell by 0.8 percent in October, according to the Conference Board’s report released Monday. This drop marks the 19th consecutive month of decline, a pattern last seen during the Great Recession.
Economists had anticipated a decline of 0.8 percent, which aligns with the actual decrease observed. The rate of the LEI’s decline has slowed somewhat recently. Between April and October 2023, the LEI contracted by 3.3 percent, a lesser decline compared to the 4.5 percent contraction seen in the previous six months.
Justyna Zabinska-La Monica, a Senior Manager of Business Cycles at The Conference Board, noted that the negative trajectory of the LEI, along with its six- and twelve-month growth rates remaining in negative territory, is concerning. Key factors contributing to the index’s recent decline include worsening consumer expectations for business conditions, a drop in the ISM Index of New Orders, declining equities, and tighter credit conditions.
The current LEI data is signaling a likely recession in the near term, though it is expected to be mild. The Conference Board anticipates that elevated inflation, high interest rates, and reduced consumer spending — owing to depleted pandemic savings and the resumption of student loan repayments — will nudge the U.S. economy into a brief recession. Their forecast suggests that real GDP will only grow by 0.8 percent in 2024, pointing to a challenging economic period ahead.
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