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Economy in Brief

U.S. Index of Leading Indicators Fell Again in July
by Sandy Batten  August 18, 2022

• July decline was the sixth in the past seven months, pointing to rising recession risks.

• Coincident indicators increased for the second consecutive month.

• Lagging indicators growth slowed.

The Conference Board's Composite Leading Economic Indicators Index fell 0.4% m/m (unchanged y/y) in July following an upwardly revised 0.7% m/m decline in June (initially -0.8%). The Action Economics Forecast Survey had looked for a 0.5% m/m decrease. Over the past six months the index has fallen 1.6%, pointing to rising near-term recession risks. This index has been a very accurate leading indicator of recessions over the past 60 years. With the Federal Reserve on an aggressive monetary tightening course and the economy already emitting signs of stress, today's leading indicators report is clearly flashing amber.

Six of the Leading index's ten components made positive contributions in July while four subtracted. The largest positive contributor was the still positively-slope yield curve, though it has been flattening recently and so its positive contribution has been falling. The largest subtracter was the continued decline in the expectations component of consumer sentiment.

The Index of Coincident Economic Indicators rose 0.3% m/m (2.1% y/y) in July following a downwardly revised 0.1% monthly gain in June (initially 0.2%). All four of the index's components made positive contributions to the July increase.

The Index of Lagging Economic Indicators increased 0.4% m/m (5.8% y/y) in July after a downwardly revised 0.7% m/m increase in June (initially 0.8%). Three of the index's seven components made positive contributions, two were unchanged and two subtracted in July.

The ratio of the Coincident index to the Lagging index is also seen as a leading indicator of recession. The ratio slipped 0.1% m/m (-3.6% y/y) in July, its seventh monthly decline in the past eight months, another indication of rising recession risks.

The Conference Board figures are available in Haver's BCI database; the components are available there, and most are also in USECON. The expectations are in the AS1REPNA database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

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