The Leading Economic Index's Decline Sparks Concerns of Impending Recession

In June, the leading economic index experienced a decline of 0.7%, marking its 15th consecutive monthly decrease. This significant drop is often considered a signal of an impending recession. However, despite this decline, the U.S. economy continues to grow and displays few indications of an imminent slump.

The leading economic index serves as a gauge of 10 different indicators that help determine whether the economy is improving or worsening. This report is published by the nonprofit organization, the Conference Board.

Economists who were surveyed by the Wall Street Journal had previously predicted a 0.6% decline, slightly lower than the actual figure.

Key Details

Out of the 10 indicators tracked by the Conference Board, seven experienced declines in May. Additionally, the measure of current economic conditions remained flat in June. Furthermore, the lagging index, which provides a retrospective view, also showed no change last month.

The Big Picture

Amidst rising interest rates, many economists are maintaining their predictions of an upcoming recession within the next year. To curb inflation, the Federal Reserve has significantly increased borrowing costs, thereby slowing down the economy.

However, despite these factors, the economy continues to grow at a faster pace than anticipated and offers limited signs of a sudden slowdown. Moreover, there is a possibility that the Federal Reserve may halt its interest rate hikes come July.

Looking Ahead

According to Justyna Zabinska-La Monica, the senior manager of business cycle indicators at the board, the data from June suggests that economic activity will continue to decelerate in the coming months. The board forecasts that the U.S. economy is likely to enter a recession from the third quarter of 2023 to the first quarter of 2024. Zabinska-La Monica attributes this potential recession to ongoing tight monetary policy and reduced government spending.