Economy is slowing and 'potentially signaling recession,' leading index finds

Economy is slowing and ‘potentially signaling recession,’ leading index finds

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The numbers: The U.S. leading index fell in August for the sixth month in a row, “potentially signaling a recession.”

The leading index fell 0.3% last month, extending a stretch of declines that began in March

The LEI is a gauge of 10 indicators designed to show whether the economy is getting better or worse. Economists polled by The Wall Street Journal had forecast a 0.1% decline.

Big picture: The economy has slowed from last year’s blistering pace. Gross domestic product, the scorecard for the economy, shrank in the first two quarters of the year.

Now the Federal Reserve is sharply raising interest rates to try to squelch the highest inflation in almost 40 years, and higher rates slow the economy. Many economists even think a recession is likely by next year.

Key details: Most of the components of the leading economic index except for new jobless claims and the interest-rate spread declined in August.

The details of the report were not entirely grim.

A measure of current economic condition edged up 0.1% while the so-called lagging index — a look of sorts in the rearview mirror — rose by 0.7%.

The report is published by the Conference Board, a private nonprofit organization.

Looking ahead: “The US LEI declined for a sixth consecutive month potentially signaling a recession,” said Ataman Ozyildirim, senior director of economic research at the board.

“Economic activity will continue slowing more broadly throughout the U.S. economy and is likely to contract,” he added. “The Conference Board projects a recession in the coming quarters.”

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.29%

S&P 500
SPX,
-0.78%

fell again in Thursday trades.

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