By Garry Bartecki
And that is the problem. Inflation or no inflation. GDP growth or inadequate GDP growth. Job claims that help and worker shortfall that does not. Interest rates too high or not high enough. Consumer spending to slow because of increasing personal debt balances. Just what are economic factors telling us that provide comfort because you feel the “conclusions” our “guesses” are reasonable?
As you know I read many economic reports and follow the markets closely to get a feel for the industries I follow. One of those is drafted by John Mauldin who I read religiously every Friday evening. It is a free publication, prepared for anybody who needs to get a feel for what is going on in the economy, which I hope then will assist with your ability to make both personal and business decisions. John’s February 17, 2024, letter is titled CHOOSE YOUR OWN ECONOMY, primarily to explain the complexities in today’s economic environment whereby economists are having a hard time deciding what data sets to select to be able to produce a meaningful forecast, which is almost impossible to do. In short, recent forecasts have not been close and thus leave us hanging from a planning perspective.
I tell myself there must be a report that works better than most that explains where we are heading, and I find the CB Leading Economic Index dated February 24. The LEI is made up of several indicators that anticipate turning points in the business cycle, which then in turn can anticipate where the economy is headed. On average, there are usually 10.6 months between a peak and a recession. This report has been in place for many years with the last peak in 2021 and we are 12.8% off the 21 peak, which puts us 25 months off from the 21 peak without a recession. With 10.6 months being the average for a recession to follow a peak, 25 months from the last peak in 21 makes me think we are closer to a recession than we think.
POINT #1 for this month is to plan thinking there is trouble on the way.