Economic barometer warns that a US recession may soon be upon us


Minneapolis
CNN

A key barometer of the health of the economy continues to show a recession warning sign, indicating that a downturn is in store for the United States in the near future. A growing number of business leaders agree that the US economy is deteriorating.

America isn’t in an official recession — not yet, anyway — but the Conference Board’s leading economic index fell for the 10th consecutive month, falling 1% to 110.5 in December, according to a published report. Monday by the Business Think Tank. Economists had expected a decline of 0.7%, according to Refinitiv.

On average, the index peaks about a year before a recession, according to the Conference Board. The index appears to have peaked in February 2022, the Conference Board noted.

“There was broad-based weakness among leading indicators in December, pointing to deteriorating conditions in labor markets, manufacturing, housing construction and financial markets in the months ahead,” said Ataman Ozyildirim, managing director. chief economics officer of the Conference Board, in a press release.

Seven of the index’s 10 constituents fell in December, and the LEI’s trajectory continues to signal a recession, according to the report.

“Overall economic activity is expected to turn negative over the next few quarters before picking up again in the last quarter of 2023,” Ozyildirim said.

The official arbiter of a recession is a panel of economists from the National Bureau Economic Research, who consider a range of economic indicators before making a decision – which can sometimes happen after a downturn begins.

But about 52% of economists polled by the National Association for Business Economics believe there is a greater than 50% chance that the United States will enter a recession this year, according to the latest NABE survey of business conditions released Monday. morning.

“For the first time since 2020, more respondents expect a decline rather than an increase in employment at their company over the next three months,” said Julie Coronado, president of NABE, in the report. “Fewer respondents than in recent years expect their company’s capital expenditures to increase over the same period.”

US economic activity has shown signs of slowing in recent months as the Federal Reserve launched a series of interest rate hikes to bring down inflation.

Fed officials say they see progress on inflation, but tight monetary policy — and future hikes — will continue to happen.

The next two-day meeting of the Fed’s rate-setting committee begins Jan. 31. The central bank is expected to hike rates by a quarter point, according to CME tool FedWatch.

Ahead of this meeting, the Fed will have additional economic data to review: fourth quarter GDP data and the personal consumption expenditure report (which contains the Fed’s preferred inflation indicator) will be released on Thursday and Friday, respectively. .

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