Leading index signals slowing ahead

Justyne Zabinska-La Monica

A monthly index forecasting economic conditions in the United States continues to decline, signaling slowing and what could be a recession.

The Conference Board reported its Leading Economic Index decreased another four-tenths of a percent to 105.4 in August. Separate measures of current conditions and past conditions increased.

“With August’s decline, the U.S. Leading Economic Index has now fallen for nearly a year and a half straight, indicating the economy is heading into a challenging growth period and possible recession over the next year,” said Justyna Zabinska-La Monica, senior manager of business cycle indicators for the Conference Board. Higher interest rates, tighter credit conditions and less upbeat consumer expectations could result in a brief and mild contraction, she said.

The New York-based think tank forecasts gross domestic product, the broad measure of goods and services produced in the U.S., will grow 2.2 percent in 2023. The pace of  growth is expected to slow to 0.8 percent in 2024.

For August, six of 10 indicators of the Leading Economic Index retreated, including consumer expectations for business conditions, interest rate spread, leading credit and new orders indexes and stock prices. An increase in average weekly claims for unemployment benefits also pulled down the index. Building permits and new orders  for both capital and consumer goods advanced. Average weekly manufacturing hours remained unchanged.

The Coincident Economic Index rose two-tenths of a percent to 110.6. The index increased eight-tenths of a percent over the past six months.

For August, all four indicators of the index advanced — industrial production, nonfarm payrolls, personal income and sales.

The Lagging Economic Index rose two-tenths of a percent to 118.5. The index edged up two-tenths of a percent over the past three months.

For August, four of seven indicators of the index rose, including the average prime rate charged by banks, consumer credit and inventories. A decrease in the duration of unemployment also bolstered the index. The cost of labor and services retreated, as did commercial and industrial financing.