We got some good news about the economy this week thanks to the Conference Board's Leading Economic Index, which tracks key economic indicators. It rose in February, a sign that the economy is heading in the right direction, the Conference Board said.
This is remarkable because until February the index was pointing downwards. In fact, February was the first time the index rose in two years.
So what has changed?
Many factors go into the Leading Economic Index: stock prices, manufacturing orders, credit availability and other indicators give us clues about future economic activity.
“So when you look at them as a group, you get a much clearer picture of what's going to happen next in the economy. Whether we are going into a recession or whether we are in an uptrend,” said Justyna Zabinska-LaMonica of the Conference Board, which compiles the index.
She says a big reason for the index's turnaround last month is that the workweek in the manufacturing sector has become longer. In other words, employees worked more hours.
“This means that new orders are coming in and production is ongoing. This means that this production has to leave the factories and is sold,” she said.
In addition, more building permits were issued, a sign that housing construction activity could pick up. There were more loans available, a sign that borrowers might be taking out more loans.
Menzie Chinn, an economics professor at the University of Wisconsin-Madison, said even if the economy slows this year, a recession is unlikely.
“At least the economy is strong enough, probably strong enough, that there won’t be actual negative growth,” he said.
Chinn said this is a fairly common view among economists right now.
Late last year, Kathy Bostjancic, chief economist at Nationwide, said she expected a recession. But since then, economic data has been stronger than she thought.
“You know, above all it was the employment figures. If more people are working, that just means high overall income for consumers, and then they can keep spending,” she said.
Bostjancic said she still believes a recession is possible.
That's because there are parts of the economy that appear more vulnerable right now, such as consumer debt.
“Credit card and auto loan defaults typically occur during early signs of a recession [are] inherently recessive,” she said.
However, Bostjancic said this is unlikely to weigh on the economy as long as the job market remains strong.
A lot is happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down what's happening in the world and tell you how it impacts you in a fact-based, understandable way. In order to continue to make this possible, we rely on your financial support.
Your donation today supports the independent journalism you rely on. For as little as $5 a month, you can help sustain Marketplace so we can continue reporting on the things that matter to you.
Comments are closed.