Economic indicators are released every week to help provide insight into the overall health of the U.S. economy. With the Fed’s tightening on monetary policy and the constant threat of a recession looming, policymakers and advisors are closely monitoring economic indicators because the data can ultimately impact business decisions and financial markets. In the week ending on August 17th, the SPDR S&P 500 ETF Trust (SPY) fell 2.16%, while the Invesco S&P 500® Equal Weight ETF (RSP) was down 2.79%.
In this article, we look at three closely watched indicators from the past week – the Conference Board Leading Economic Index, retail sales, and industrial production. By examining these data points, we gain crucial insights into different aspects of economic activity, which subsequently help provide us with a better understanding of the economy’s trajectory.
Leading Economic Index
The Conference Board Leading Economic Index (LEI), a composite index designed to predict the economy’s trajectory, continues to sound alarms about future economic uncertainty. July marked the 16th consecutive month of decline for the LEI, with 0.4% drop to 105.8 – its lowest reading since 2020. This lengthy sequence of monthly declines, reminiscent of the period leading up to the 2007-2008 Great Recession, bolsters the Conference Board’s conviction about an impending recession. More specifically, the Conference Board is projecting a short and shallow recession spanning from Q4 2023 to Q1 2024 due to the index’s indications of slowing economic activity.
In July, eight of the index’s ten components made negative contributions, with the largest declines coming from average consumer expectations for business conditions, ISM® New Orders Index, and the interest rate spread (10-year Treasury bonds less federal funds rate). The two positive contributors were the S&P 500® Index of Stock Prices and the average weekly initial claims for unemployment insurance.