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After dropping 1.1% in November (revised), the U.S. Conference Board Leading Economic Index (LEI) fell another 1.0% in December 2022 to reach 110.5. The LEI has decreased 4.2% over the last six months, falling faster than its 1.9% decline within the six-month period ending in June 2022. This significant drop indicates an approaching recession. 

“There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead,” said Ataman Ozyildirim, Senior Director of Economics at The Conference Board.

The U.S. Coincident Economic Index, however, was up 0.1% to 109.6 in December and has risen 1.4% over the past six months, picking up pace from the previous six months (+0.4%). The Lagging Economic Index rose 0.3% to 117.6 and has increased 2.3% in the last six-month period, slowing from its 4.5% rise in the previous six months. 

“The coincident economic index (CEI) has not weakened in the same fashion as the LEI,” Ozyildirim added, “because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production — also a component of the CEI — fell for the third straight month.”

Ozyildirim predicts that overall economic activity will decrease in the coming months before gaining momentum again in Q4.