The U.S. economy has been growing for nearly two years, but the leading economic index fell 0.8% in October and has been declining for 19 months straight. Despite this, economists believe that the country is not any closer to a recession than when the streak began. The index, which tracks 10 indicators, had been forecasted to drop by 0.7%, but it exceeded this expectation.
The last time the index fell so many times in a row was during the Great Recession from 2007 to 2009. However, what’s keeping the economy going is a steady increase in consumer spending at a time of extremely low unemployment rates. This offsets the negative effects of high inflation and rising interest rates.
Despite this positive outlook, the U.S.’s growth rate slowed down in the third quarter as it grew at an annual pace of 4.9%. This is not a sign of an impending breakdown in the economy, but it will be challenging for the country to maintain its momentum with interest rates at their highest levels in years. The Federal Reserve raised a key short-term interest rate to combat inflation, but higher borrowing costs always lead to slower economic growth or even trigger an outright recession.
Looking ahead, economists expect elevated inflation, high interest rates, and contracting consumer spending due to depleting pandemic savings and mandatory student loan repayments to lead to a very short recession in the near future. Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board stated that these factors will negatively impact consumer spending and slow down economic growth significantly.
Market reaction: Despite this news, stock markets rose on Monday with both the Dow Jones Industrial Average DJIA and S&P 500 SPX closing up slightly after strong earnings reports from major companies like Apple AAPL and Microsoft MSFT