Recession might be in 2024 !
The recent release of economic data by the Conference Board has sparked concerns about a potential recession in the first half of the upcoming year. The U.S. Leading Economic Index, a compilation of 10 key indicators, declined by 0.5% in November, consistent with economists’ expectations. Notably, this marks the third consecutive monthly drop, with stock prices being the sole positive contributor in November.
Justyna Zabinska-La Monica, Senior Manager of Business Cycle Indicators at The Conference Board, emphasized the significance of the decline, stating that despite the economy’s resilience, the U.S. Leading Economic Index suggests a forthcoming deceleration in economic activity. The Conference Board’s forecast, based on these indicators, points towards a short and shallow recession in the first half of 2024.
This economic outlook is compounded by the fact that the index has contracted by 3.5% between May and November. While this is a smaller decrease than the 4.3% decline observed in the preceding six months, it adds to the growing concerns about the economy’s trajectory.
In addition to the Leading Economic Index data, attention is drawn to the latest revision of third-quarter economic growth, revealing a 4.9% growth over the summer, slightly slower than initial estimates. Projections from the Federal Reserve indicate an annual growth rate of about 2.6% for the current year, slowing to 1.4% in the following year. This aligns with the Fed’s objective of achieving a soft landing for the economy after grappling with inflation concerns.
The Conference Board’s Leading Economic Index, based on 10 components including stock prices, interest rates, and employment data, serves as a crucial tool for signaling turning points in the business cycle and forecasting the near-term economic trajectory.
As the economic landscape unfolds, all eyes are now on the upcoming release of the Personal Consumption Expenditures Price Index, a key indicator of inflation trends. Despite the anticipation of a drop in the Core PCE, excluding volatile food and energy prices, to an annualized rate of 3.3% in November, concerns persist as this remains higher than the Fed’s 2% target.
In summary, the recent economic data paints a nuanced picture, combining positive indicators like stock prices with concerning trends in leading economic indicators. The delicate balance sought by the Federal Reserve to achieve a soft landing in the face of potential recessionary pressures adds complexity to the economic outlook as the year comes to a close.
