By The U.S. Leading Economic Index, an economic index that measures business cycles, has fallen for the 17th consecutive month in August. This indicates that economic activity in the United States is likely to slow down in the coming months.
According to The Conference Board, the index dropped by 0.4% to reach 105.4 in August, following a decline of 0.3% in July. This suggests that the underlying components of the index weakened at a faster pace.
Although the decline was slightly smaller than expected, economists polled by The Wall Street Journal had predicted a 0.5% fall.
Justyna Zabinska-La Monica, the senior manager of Business Cycle Indicators at The Conference Board, stated, “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.”
Several factors contributed to the weakened index, including weak new orders, deteriorating consumer expectations of business conditions, as well as high interest rates and tight credit conditions.
Going forward, The Conference Board forecasts that the U.S. economy will grow by 2.2% in 2023 before cooling to 0.8% growth in 2024, according to Zabinska-La Monica.
However, there were some positive signs in other economic indicators. The Coincident Economic Index, which measures current economic activity, improved by 0.2% in August to reach 110.6. Additionally, the Lagging Economic Index also rose by 0.2%.
The Leading Economic Index serves as a predictive variable that anticipates turning points in the business cycle, usually around seven months in advance. It is based on ten components including initial claims for unemployment insurance, manufacturers’ new orders, building permits for new private housing units, stock prices, and consumer expectations. The index is designed to signal swings in the business cycle.
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