U.S. Leading Economic Index Adds Further Signs of Recession Ahead

By Xavier Fontdegloria

An economic index that measures U.S. business cycles declined sharply again in December, adding to evidence of an upcoming recession this year.

Research group The Conference Board said Monday that its Leading Economic Index fell by 1% to 110.5 in December after dropping 1.1% in November, a sharper decline than the 0.7% expected by economists polled by The Wall Street Journal.

The indicator continued to signal recession for the U.S. economy in the near-term, said Ataman Ozyildirim, senior director of economic research at The Conference Board. "Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023," he said.

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.

In December, there was widespread weakness among these components, a sign of deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead, Mr. Ozyildirim said.

The Coincident Economic Index--a measure of current economic activity--increased 0.1% to 109.6 in December. This indicator hasn't weakened as much as the leading index because labor market indicators remain robust. The Lagging Economic Index rose 0.3% to 117.6, The Conference Board said.

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(END) Dow Jones Newswires

01-23-23 1046ET