The U.S. economy is showing signs of slowing down, but the likelihood of a full-blown recession is decreasing, according to Conference Board data.
LEI Decline
The Conference Board reported that its Leading Economic Index (LEI), which is a composite of various economic factors, dropped by 0.6% in July. This is somewhat better than June, which saw a 0.2% decline. The index has been declining since its peak in the second quarter of 2022, but the pace of decline is slowing, indicating that the economy isn't crashing into a recession.
Economic Indicators Details
The LEI is made up of indicators such as average weekly hours in manufacturing, initial jobless claims, new manufacturing orders, stock prices, and credit conditions. These indicators help gauge the direction of the economy. When such indicators decline for two consecutive quarters, it usually signals an approaching recession. Despite the ongoing decline, the six-month annualized change in the LEI narrowed to -2.1% in July, compared to -3.1% in June.
Market Outlook
Stock and cryptocurrency markets recently took a hit. However, the latest data might offer some reassurance. Earlier in the month, weaker-than-expected nonfarm payroll data led to recession fears. The Treasury yield curve and Sahm’s Rule also signaled a possible recession. Additionally, the unwinding of the yen carry trade created further complications in financial markets. Despite this, cryptocurrencies like Bitcoin have shown resilience, again crossing the $60,000 mark.
The U.S. economy continues to slow, but current data suggests a full recession is unlikely in the near term. Despite ongoing market volatility, such data may indicate a move towards stabilization.
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