Updates - Macro Trend

Conference Board’s Leading Index Shows Little Sign of Recession

Simon White
Bloomberg
December 21, 2023

The Conference Board’s Leading Index shows few signs of a recession yet. When that changes, it will be an early sign the market may need to begin pricing a more worrisome outcome.

The measure dropped 0.5% in November. This marks the 20th consecutive decline, but a look under the hood shows the index is not as weak as the headline number intimates – with the six-month diffusion well above levels that are consistent with prior recessions.

The CB’s Leading Index is geared towards the goods economy. The asynchronous recoveries of the goods and services economies after the pandemic meant that goods GDP contracted from a high level, while services GDP continued to recover. Since both goods and services GDP did not contract at the same time, we have not yet had a full-blown recession.

The Leading Index therefore correctly identified the recession in goods GDP, and the diffusion is now indicating the goods economy should soon improve. However, as next year progresses, higher rates will increasingly bite, making a downturn later on in 2024 more likely.

December 21, 2023