Recession Still on the Way, Leading Economic Indicator Shows

For all the talk of no recession, a leading economic indicator suggests that a recession is still on its way.

The Conference Board's U.S. Leading Economic Index, a predictor of the overall direction of the economy, declined by 0.7% in June to 106.1, following a decline of 0.6% in May.

The Index is down 4.2% over the six-month period between December 2022 and June 2023. That marks a steeper rate of decline than its 3.8% contraction over the previous six months. A decline of more than 4 percentage points indicates a coming recession.

June also marked the 15th straight month for the index — the longest streak of consecutive drops since the run-up to the Great Recession in 2007 and 2008.

"Taken together, June’s data suggests economic activity will continue to decelerate in the months ahead," said Justyna Zabinska-La Monica, senior Manager, Business Cycle Indicators, at The Conference Board.  "We forecast that the US economy is likely to be in recession from Q3 2023 to Q1 2024."

The index is based on 10 components, ranging from stock prices and interest rates to unemployment claims and consumer expectation for business conditions.

June's decline was "fueled by gloomier consumer expectations, weaker new orders, an increased number of initial claims for unemployment, and a reduction in housing construction,” Zabinska-La Monica said.

"Elevated prices, tighter monetary policy, harder-to-get credit, and reduced government spending are poised to dampen economic growth further," she added.

The index is running contrary to other economic barometers. The labor market remains strong, and the economy is still growing.

Earlier this week, Goldman Sachs has trimmed the probability of a coming recession to 20% from 25%, citing a raft of improving economic data.

The Conference Board is a non-profit, non-partisan think tank founded in 1916 whose research is widely followed.

Here's a list of the 10 components that make up its Leading Economic Index: