Economic Indicators Fall Sharply in November, 2023 Recession

The organization’s Leading Economic Index® now stands at 113.5, following a decline of 0.9 percent in October.

The decline was broad-based and only the stock market showed a positive contribution, though it has wobbled of late.

“Only stock prices contributed positively to the US LEI in November,” said Ataman Ozyildirim, senior director, economics, at the business organization. “Labor market, manufacturing, and housing indicators all weakened – reflecting serious headwinds to economic growth. Interest rate spread and manufacturing new orders components were essentially unchanged in November, confirming a lack of economic growth momentum in the near term.”

The report follows news earlier on Thursday showing gross domestic product grew by an annual rate of 3.2% in the third quarter. That was better than the earlier estimate of 2.9% and higher than forecasts, driven by higher than anticipated consumer spending.
And on Wednesday, the Conference Board said its consumer confidence index for December improved on better sentiment about inflation and the outlook for the economy.

The indicators offer a mixed view of an economy that is showing resilience in the face of aggressive monetary tightening by the Federal Reserve, designed to curb inflation. But Ozyildirim said the outlook is consistent with a recession in 2023.

“Despite the current resilience of the labor market – as revealed by the US CEI in November – and consumer confidence improving in December, the US LEI suggests the Federal Reserve’s monetary tightening cycle is curtailing aspects of economic activity, especially housing,” he said. “As a result, we project a US recession is likely to start around the beginning of 2023 and last through mid-year.”

That is pretty much the mainstream view of the economy, although some analysts have pointed to the speed with which inflation has fallen – down about 2 percentage points from mid-summer – as evidence the economy could skate by.

Key to that will be how long the Fed maintains its high interest campaign in the face of a slowing economy. Chairman Jerome Powell has vowed to “stay the course” until inflation reaches the central bank’s average annual target of 2%. But the market has rallied at times on the belief the Fed will blink and be forced to lower rates once the recession hits, especially if it turns out to be severe.

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