The leading economic index in the US declined by 0.8% in October, marking its 19th consecutive month of decline. Despite this, economists polled by the Wall Street Journal had predicted a drop of only 0.7%. The last time the index fell so many times in a row was during the Great Recession from 2007 to 2009. However, despite this, the US economy does not seem any closer to a recession than when the streak began.
What has kept the US economy growing is a steady increase in consumer spending at a time of extremely low unemployment. This increase has offset the negative effects of high inflation and rising interest rates. The big picture is that the US grew at an annual pace of 4.9% in the third quarter, which is not a sign of an impending breakdown in the economy. However, maintaining momentum will be challenging with interest rates at their highest levels in years. The Federal Reserve has raised a key short-term interest rate to combat inflation, but higher borrowing costs always slow down the economy and can trigger an outright recession.
Looking ahead, Justyna Zabinska-La Monica, senior manager of business cycle indicators at the Conference Board, expects elevated inflation, high interest rates, and contracting consumer spending due to depleting pandemic savings and mandatory student loan repayments to tip the US economy into a very short recession.
In response to this news, the Dow Jones Industrial Average DJIA and S&P 500 SPX rose in Monday trading.