US Leading Indicators Slump Signals “Short & Shallow Recession” In 1H24

The Conference Board’s Leading Economic Indicators (LEI) continued its decline in November, dropping 0.5% MoM (in line with expectations), while October’s -0.8% decline was revised down to -1.0%.

The biggest positive contributor to the leading index was stock prices at +0.18

The biggest negative contributor was average consumer expectations at -0.22

This is the 20th straight MoM decline in the LEI (and 21st month of 23) –  the longest streak of declines since ‘Lehman’ (22 straight months of declines from June 2007 to April 2008)

“The US LEI continued declining in November, with stock prices making virtually the only positive contribution to the index in the month,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board.

“Housing and labor market indicators weakened in November, reflecting warning areas for the economy.

The Leading Credit Index™ and manufacturing new orders were essentially unchanged, pointing to a lack of economic growth momentum in the near term.

Despite the economy’s ongoing resilience – as revealed by the US CEI – and December’s improvement in consumer confidence, the US LEI suggests a downshift of economic activity ahead.

As a result, The Conference Board forecasts a short and shallow recession in the first half of 2024.”

Despite ‘soft landing’ hype, the LEI is showing no signs at all of ‘recovering’, tumbling back below the peak in March 2006…

And on a year-over-year basis, the LEI is down 7.6% (down YoY for 17 straight months) – close to its biggest YoY drop since 2008 (Lehman) outside of the COVID lockdown-enforced collapse…

The annual growth rate of the LEI continues to be negative, but may have reached a bottom…

The trajectory of the US LEI continues to signal a recession over the next 12 months

Is this why The Fed pivoted?

Perhaps not, as the massive easing of financial conditions in the last few months suggests a turn in LEI is imminent…

And hence the ‘soft landing’ mission is accomplished.