By Ed Frankl
An economic index that measures U.S. business cycles fell for the 17th consecutive month in August, indicating that economic activity going forward looks set to slow down.
The Conference Board said Thursday its Leading Economic Index tumbled 0.4% to 105.4 in August after declining 0.3% in July, suggesting that its underlying components weakened at a faster pace.
The reading was a slightly smaller decline than expectations of a 0.5% fall, according to a consensus of economists polled by The Wall Street Journal.
“With August’s decline, the U.S. Leading Economic Index has now fallen for nearly a year and a half straight, indicating the economy is heading into a challenging growth period and possible recession over the next year,” said Justyna Zabinska-La Monica, senior manager, Business Cycle Indicators, at The Conference Board.
Weak new orders, deteriorating consumer expectations of business conditions, alongside high interest rates and tight credit conditions all hit the index, she added.
The organization now forecasts that the U.S. economy will grow by 2.2% in 2023, before cooling to 0.8% growth in 2024, Zabinska-La Monica added.
However, The Conference Board’s Coincident Economic Index–a measure of current economic activity–improved by 0.2% in August to 110.6. Meanwhile, its Lagging Economic Index also rose 0.2%.
The Leading Economic Index is a predictive variable that anticipates turning points in the business cycle by around seven months. The indicator is based on 10 components, among them initial claims for unemployment insurance, manufacturers’ new orders, building permits of new private housing units, stock prices and consumers expectations. It is intended to signal swings in the business cycle.
Write to Ed Frankl at edward.frankl@wsj.com
Read the full article here