An economic index is flashing a recession warning sign, but it may be a ‘mixed signal.’ Here’s what you need to know – CNBC

by | Oct 25, 2022 | Financial

Michael M. Santiago | Getty ImagesA monthly gauge of what could lie ahead for the U.S. economy is flashing a recession warning sign.The Leading Economic Index dipped by 0.4% in September from August and is down 2.8% since March, according to the Conference Board, an independent group that publishes the index. The latest reading is below a threshold that the organization considers a recession signal.”Its persistent downward trajectory in recent months suggests a recession is increasingly likely before year-end,” said Ataman Ozyildirim, senior director of economics at the Conference Board.More from Personal Finance:Child tax credit still available to qualifying familiesThe 4 big factors impacting markets, economyWhat to know about climate-related tax breaksYet at this point, some experts say, the index’s latest reading is not indicative that a recession is imminent.”The question is whether it is going to continue to deteriorate,” said Brian Bethune, an economist and professor at Boston College. “It’s a mixed signal, I’d say.”Other recession hallmarks are mixedA recession is generally defined as a broad-based, significant decline in economic activity that lasts for more than a few months, according to the National Bureau of Economic Research, a non-government agency that identifies recessions.While the economy did contract in the first two quarters of 2022 by 1.6% and 0.6%, respectively, other factors that characterize a recession — such as widespread jobless claims and a broad drop in personal wages and salaries — have not materialized.Some LEI changes are ‘not significant’The Leading Economic Index is based on 10 components that detail factors like jobless claims, manufacturing orders and performance of the S&P 500 stock index, a broad barometer of how U.S. companies are faring. Some of those components show significant weakness — the S&P is down 20.3% year to date through Oct. 24 — while others do not.For instance, while the average weekly hours worked in manufacturing has trended downward on a monthly basis since February when it was 41.6, September’s reading wasn’t too far below that at 41 …

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