Last updated: Aug 17, 2023 at 10:25am ET
Initial publication: August 17, 2023 at 10:15 am ET
The numbers: The leading economic index fell 0.4% in July for the 16th straight month, but other economic indicators suggest a recession is still a long way off.
Economists polled by the Wall Street Journal had forecast a 0.4% decline.
The leading index is a scale made up of 10 indicators that is intended to show whether the economy is doing better or…
The numbers: The leading economic index fell 0.4% in July for the 16th straight month, but other economic indicators suggest a recession is still a long way off.
Economists polled by the Wall Street Journal had forecast a 0.4% decline.
The leading index is a scale made up of 10 indicators that is intended to show whether the economy is doing better or worse. Seven of the ten components fell in July.
Historically, a major losing streak portends an impending recession. Nevertheless, the economy has continued to grow and growth in the third quarter is likely to be particularly strong. Gross domestic product could increase by 5% or more.
Important details: A measure of current conditions known as the coincidence index actually rose 0.4% in July, possibly reflecting a more accurate view of the economy.
“The CEI signals that we are still in a favorable growth environment right now,” confirmed Justyna Zabinska-La Monica, senior manager of economic indicators at the Conference Board.
The so-called lagging index – a look in the rear-view mirror – remained unchanged in the last month.
Big picture: Many economists have scaled back long-standing recession forecasts or pushed back a target date to next year. The Conference Board did not do this.
The board is forecasting a short and shallow recession beginning in late 2023 and lasting through early next year.
However, the resilience of the economy raises the question of whether the leading indicator is as accurate as it used to be.
However, the US economy is still not out of the danger zone. Interest rates have risen rapidly over the past year as the Federal Reserve sought to curb high inflation. Higher borrowing costs typically slow the economy.
If the Fed has to hike rates even more, it would put the economy at greater risk.
Looking ahead: “The leading index continues to suggest that economic activity is likely to slow and contract slightly in the coming months,” said Zabinska-La Monica.
Market reaction: The Dow Jones Industrial Average DJIA and the S&P 500 SPX were higher in Thursday trade.
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