Conference Board Revises U.S. Economic Outlook, Abandons Recession Prediction

📝 SUMMARY: On February 20, the Conference Board announced a significant shift in its economic forecast for the United States, discarding its longstanding prediction that the U.S. economy would enter into a recession. This revision comes after observing a 0.4% decline in the Leading Economic Index (LEI) for January to a score of 102.7, marking the 23rd consecutive monthly decline. Despite this, the index, which serves as a gauge for future economic activity, showed signs of stabilizing, with its six-month annualized rate of decline slowing considerably and turning less negative than any point since August 2022.

The LEI's latest data revealed that six out of its 10 components made positive contributions over the past six months, a first in the past two years, signaling a departure from recession forecasts. This optimistic turn is largely attributed to the recent surge in stock prices, with the S&P 500 index ($.INX) experiencing a more than 20% increase since late October, buoyed by the Federal Reserve's indication of an end to its aggressive interest rate cycle.

Other factors contributing to the improved economic outlook include low unemployment filings, future credit availability, home building permits, and new orders for manufactured goods. These elements collectively suggest that the U.S. economy remains in growth mode, with expectations of continued strength in the labor market, financial conditions easing, and sustained consumer spending into 2024.

Economists, including Matthew Martin from Oxford Economics, view the LEI's decline as being led by a narrow group of indicators expected to improve in the coming months. They project first-quarter consumption growth at an annualized rate of 2.1%, slightly below the baseline forecast but still indicative of solid GDP growth of 2%. This revised outlook from the Conference Board underscores a more optimistic view of the U.S. economy's trajectory, moving away from recession fears towards expectations of ongoing growth.

🔍 SOURCE: https://www.reuters.com/world/us/leading-economic-index-no-longer-signals-us-recession-conference-board-2024-02-20/