Economic Indicators Remain Negative in December, Recession Concerns Linger

Key Details:

• The U.S. economy’s leading index fell by 0.1% in December, marking 21 consecutive months of decline.
• Six of the ten indicators in the survey showed positive signs, an improvement compared to previous months.
• The two previous periods of extended negative readings, 1973-1975 and 2007-2009, were followed by recessions.
• The leading index is a gauge developed by the nonprofit Conference Board to assess the direction of the economy.

The Economic Landscape:

Despite the prolonged negative readings in the leading index, the U.S. economy has continued to expand, albeit at a slower pace. In the third quarter of 2023, the economy grew at an annual rate of 4.9%, while gross domestic product (GDP) is estimated to have grown by almost 2% in the fourth quarter.

Inflation has remained elevated, prompting the Federal Reserve to raise interest rates in an effort to curb price increases.

Recession Predictions and Federal Reserve Actions:

Economists are divided on the likelihood of a recession in 2024. Some believe that the economy is strong enough to withstand the headwinds, while others warn that the prolonged negative readings in the leading index are a cause for concern.

If the Federal Reserve lowers interest rates this year, it could help avert a downturn. However, the central bank has indicated that it may have reached the end of its rate-hiking cycle.

The Conference Board’s Forecast:

The Conference Board maintains its forecast of negative GDP growth in the second and third quarters of 2024, followed by a recovery later in the year.

Market Reaction:

On Monday, the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) saw gains in trading. Investors appeared to be taking a positive view of the economic data, despite the negative reading in the leading index.

Additional Information:

• The leading index comprises ten indicators, including consumer expectations, stock prices, building permits, and initial unemployment claims.
• The Conference Board also publishes a coincident index and a lagging index, which provide insights into the current state of the economy and its past performance, respectively.
• Economic forecasts are subject to change based on various factors, including geopolitical events, policy changes, and consumer behavior.

Call to Action:

Stay tuned for further updates on the economic outlook. In the meantime, you can protect your finances by creating a budget, saving money, and investing wisely.