A key barometer of future economic growth suggests the U.S. will enter a recession later this year, with the economy contracting from April to September.
The Conference Board's Economic Leading Index, which combines a variety of economic indicators designed to predict peaks and troughs in the U.S. economy, fell 0.1% in December.
The decline was smaller than expected and smaller than the previous month. Economists had expected the index to fall 0.3% after falling 0.5% in November.
The index has fallen 2.9% over the past six months, which is smaller than the 4.3% drop over the past six months.
“The U.S. LEI declined slightly in December, continuing to signal underlying weakness in the U.S. economy,” said Justina Zabinska La Monica, senior manager of business cycle indicators at the Conference Board. “As the monthly decline narrows, six- and 12-month LEI growth rates have picked up but remain negative, continuing to suggest recession risk. We expect it to turn negative in the second and third quarters of the year, but to begin to recover by the end of the year.”
The steep decline in the LEI in the first half of last year led the Conference Board to predict that the economy would slow in the second quarter and slip into recession by the middle of this year. Instead, economic growth accelerated from 2% in the first quarter to 2.1% in the second and 4.9% in the third.
The government will release its first estimates of growth for the fourth quarter on Thursday. This is expected to show the economy grew at a pace of 2%, although recent economic data suggests the growth rate could be even higher.
