The Conference Board reported that Leading Economic Indicators (LEI) fell 0.8% in October, which is the nineteenth consecutive month of declines. The LEI tracks where the economy is heading, and its “trajectory remained negative, and its six- and twelve-month growth rates also held in negative territory in October,” explained Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators.
What’s the bottom line? Historically, once the LEI turns negative, we have seen on average a 22-month lead time until the U.S. enters a recession. In fact, the last time we saw a stretch of negative reports like this was 2007 to 2009, ahead of the Great Recession.
Zabinska-La Monica added that, “The Conference Board expects elevated inflation, high interest rates, and contracting consumer spending – due to depleting pandemic saving and mandatory student loan repayments – to tip the U.S. economy into a very short recession.”
While a recession is not a great thing for the economy, one positive aspect is that periods of recession are always coupled with lower interest rates.