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The numbers: The leading economic index dropped 0.7% in May and declined for the 14th month in a row, but there’s still little evidence the U.S. is headed toward recession.
Economists polled by the Wall Street Journal had forecast a 0.7% drop.
The leading economic index is a gauge of 10 indicators designed to show whether the economy is getting better or worse. The report is published by the nonprofit Conference Board.
Key details: Six of the 10 indicators tracked by the Conference Board declined in May.
A measure of current economic conditions, meanwhile, rose 0.2% in May.
The so-called lagging index — a look in the rearview mirror — increased 0.1%.
Big picture: The economy is still chugging along despite higher interest rates. Gross domestic product grew in the first quarter and is on track to expand again in the second quarter.
The Federal Reserve last week bumped up its GDP growth forecast to 1% in 2023 from just 0.4% a few months ago.
The leading index has been signaling a recession for months, but senior Fed officials caution the pandemic has upended old economic models. The economy might not react as it normally does.
Looking ahead: “While we revised our [second quarter] GDP forecast from negative to slight growth, we project that the U.S. economy will contract” from the third quarter of 2023 through the first three months of 2024, said Justyna Zabinska-La Monica, senior manager of business cycle indicators at the board.
“The recession likely will be due to continued tightness in monetary policy and lower government spending.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell in Thursday trading.
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