A key barometer of future economic growth is indicating that the U.S. will slip into a recession later this year, with the economy contracting between April and September.
The Conference Board’s Leading Economic Index, a composite of various economic indicators that is designed to predict peaks and troughs of the U.S. economy, fell 0.1 percent in December.
The decline was smaller than expected and smaller than the prior month. Economists had forecast a 0.3 percent decline in the index after a 0.5 percent contraction in November.
The index has fallen 2.9 percent in the last six months, a smaller decrease than the 4.3 percent in the previous six months.
“The US LEI fell slightly in December, continuing to signal underlying weakness in the US economy,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “As the magnitude of monthly declines has lessened, the LEI’s six-month and twelve-month growth rates have turned upward but remain negative, continuing to signal the risk of recession ahead. Overall, we expect GDP growth to turn negative in Q2 and Q3 of 2024 but begin to recover late in the year.”
The LEI’s sharp decline in the first half of last year led to the Conference Board predicting the economy would slow in the second quarter and fall into a recession by midway through the year. Instead, economic growth picked up from two percent in the first quarter, to 2.1 percent in the second quarter, to 4.9 percent in the third quarter.
The government will release the first estimate for fourth-quarter growth on Thursday. That is expected to show the economy grew at a two percent pace, although recent economic data suggest growth might be even higher.