Analysis: U.S. leading economic indicators continue to fall, but no longer signal a recession
Non-partisan non-profit research organization The Conference Board released data on Tuesday showing that major economic indicators in the United States still point to an economic slowdown, but no longer indicate an economic recession. This is a positive signal for risk assets, including cryptocurrencies.
The organization's Leading Economic Index (LEI) fell 0.2% in June and another 0.6% to 100.4 in July. According to data from MacroMicro, the index peaked in the second quarter of 2022 and has been declining ever since. The LEI includes several forward-looking indicators such as average weekly hours in manufacturing, average initial claims for unemployment insurance, the ISM new orders index, stock prices, and leading credit indicators. It helps identify changes in economic trends and turning points in financial markets and is considered one of the most reliable signals of an economic recession (defined as consecutive quarters of contraction in growth rate). The continued decline in the leading index indicates that the economy is about to face headwinds. However, the annualized six-month change in the leading index narrowed from -3.1% in June to -2.1% in July, indicating that the risk of an economic recession is decreasing.
Justyna Zabinska-La Monica, Senior Director of Business Cycle Indicators at the committee, said in a statement, "The leading index continues to decline on a month-over-month basis, but the six-month annual growth rate no longer signals a recession in the future." The latest data may reassure bullish investors in risk assets. Given the recent market downturn and resulting low sentiment, painful trading in stocks and cryptocurrencies may now be at higher levels. Earlier this month, US non-farm payroll data showed a significant slowdown in job growth in July, and the market began to worry about an economic recession. The US Treasury yield curve has steepened in a bull market, indicating an economic recession, and the so-called Sam rule has also issued a similar warning. The massive unwinding of yen carry trades has added fuel to the fire.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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