U.S. leading economic indicators point lower for 18th straight month, but still no sign of recession

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The numbers: The leading economic index sank 0.7% in September and was negative for the 18th month in a row — but the U.S. is still on track to post a sizable increase in economic growth in the third quarter.

Economists polled by the Wall Street Journal had forecast a 0.4% decline in the leading index, a gauge of 10 indicators designed to show whether the economy is getting better or worse.

A big losing streak typically foreshadows a recession, but the economy has continued to expand and many forecasters have dropped their recession calls.

The latest forecasts suggest that gross domestic product, the official scorecard of the economy, is likely to expand at a hefty 4%-plus rate in the third quarter.

Key details: A measure of current conditions, known as the coincident index, rose 0.3% in September.

The so-called lagging index — a look in the rearview mirror — edged up 0.2% last month.

Nine of the 10 indicators in the index were flat or declined in September.

Big picture: The economy shows no sign of being on the verge of recession, but as some analysts note, the late stages of a business cycle rarely give clear hints of a pending downturn.

The Federal Reserve has raised a key short-term interest rate to as high as 5.5% from near zero a year and a half ago, and it can take time for the full effects of such an increase to weigh on the economy.

Looking ahead: “So far, the U.S. economy has shown considerable resilience despite pressures from rising interest rates and high inflation,” said Justyna Zabinska-La Monica, senior manager of business cycle indicators at the Conference Board, which publishes the index.

“Nonetheless, the Conference Board forecasts that this trend will not be sustained for much longer, and a shallow recession is likely in the first half of 2024,” she said.

Market reaction: The Dow Jones Industrial Average
DJIA
and S&P 500
SPX
rose slightly in Thursday trading.

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