US Economy Not Headed For Recession Despite 14-month Decline Streak, Says Yardeni Research

The Conference Board’s Leading Economic Index released Thursday showed an extended declining streak, but an analyst suggested he wasn’t concerned.

The Leading Economic Indicator(LEI) is a composite index consisting of different variables that are intended to predict turning points in the economy, this predictive index is highly correlated.  “Despite the (LEI) index declining for 14 months on a trot, there is little evidence the U.S. is headed toward recession,” said Yardeni Research. The firm noted that the index of Coincident Economic Indicators (CEI), which points to current conditions, rose to a record high.

“There is an anticipated recession starting in the third quarter of 2023,” said Conference Board said in a statement

Yardeni Research analysts, however, think otherwise. “We believe we’ve been in a rolling recession, making an economy-wide recession less likely,” said the firm. 

Job openings remain very high with the  Strong Economic Signals, Yardeni Research noted. But new jobless claims, which is a component of the LEI, came in at 264,000 in the week ended June 17, unchanged from the previous week. This marked the highest level of initial claims activity since Oct. 2021.

The yield curve, another component of the LEI, has been a negative contributor since it inverted last summer, the firm said. Although it accurately predicted the banking crisis in March, an economy-wide credit crunch or recession has not materialized, it said.

 “The S&P 500 Index, another LEI component, has been rallying since last October. “Investors are growing weary of waiting for a widely-anticipated recession that remains a no-show,” said the firm. 

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Edited by Judy J. Rotich and Deborah .C. Amirize