Don’t Count Out That Looming Recession Just Yet, A Leading Economic Indicator Suggests

The recession that never came may still be on its way, a leading economic indicator released on Thursday continues to signal.

The Conference Board's U.S. Leading Economic Index declined by 0.4% in July to 105.8, following a 0.7% decline in June and a 0.6% drop in May.

July's number came in just as economists had expected, according to estimates gathered by FactSet.

“The US LEI — which tracks where the economy is heading — fell for the sixteenth consecutive month in July, signaling the outlook remains highly uncertain," said Justyna Zabinska-La Monica, senior manager of business cycle indicators, at The Conference Board. "The leading index continues to suggest that economic activity is likely to decelerate and descend into mild contraction in the months ahead."

The Index is down 4% over the six-month period between January and July. That marks a steeper rate of decline than its 3.7% contraction over the previous six months and signals a recession.

July marks the longest streak of consecutive drops since the run-up to the Great Recession in 2007 and 2008.

In its June report, The Conference Board was more declarative in predicting a recession. "We forecast that the US economy is likely to be in recession from Q3 2023 to Q1 2024," said Zabinska-La Monica in a statement. "Elevated prices, tighter monetary policy, harder-to-get credit, and reduced government spending are poised to dampen economic growth further.”

A slew of analysts and economists have capitulated on earlier recession forecasts and declared a soft landing is more likely, including JPMorgan Chase, Bank of America, Goldman Sachs and even staff at the Federal Reserve.

“We doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected,” Michael Feroli, the chief economist at JP Morgan Chase, the nation's largest bank, wrote in a note to clients earlier this month.

The Conference Board is a nonpartisan, nonprofit think tank founded in 1916 to provide business insights for its more than 2,000 member companies.

Its Leading Economic Index is based on 10 components, ranging from stock prices and interest rates to unemployment claims and consumer expectations for business conditions.

Here's a list of the 10 components that make up the index: