By Joshua Kirby


Economic activity looks set to weaken further in the U.S. but at a lower pace than earlier, as weak manufacturing and consumer sectors continue to suggest recession in 2024.

The Conference Board said Monday that its Leading Economic Index fell 0.1% in December, having fallen 0.5% in November, marking 21 months of unceasing decline.

The index had been expected to fall a little more sharply, down 0.3%, according to a poll of economists compiled by The Wall Street Journal.

The index's continued slide points to underlying weakness in the economy, said Justyna Zabinska-La Monica, senior manager for Business Cycle Indicators at The Conference Board. Six of 10 components turned positive, suggesting some green shoots at the end of the year. But weakness in manufacturing and consumer spending amid high interest rates dragged the overall indicator downward.

The index contracted by 2.9% in the year's second half, slowing from 4.3% in the previous six months.

"As the magnitude of monthly declines has lessened, the LEI's six-month and 12-month growth rates have turned upward but remain negative, continuing to signal the risk of recession ahead," Zabinska-La Monica said. "Overall, we expect gross domestic product growth to turn negative in the second and third quarter of 2024 but begin to recover late in the year," she said.

Despite the dip in the index, the odds of a recession are decreasing in the U.S., according to a WSJ poll of economists published earlier this month. They now see the likelihood at 39%, down sharply from the previous survey, though they warn that growth will be sluggish in any case.

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 consumer expectations. It is intended to signal swings in the business cycle.


Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby


(END) Dow Jones Newswires

01-22-24 1034ET