Summary
The Leading Economic Index (LEI) fell in January. Again. This makes 23 months that this composite of leading indicators warned of a downturn that has not come. We unpack the factors weighing on this month’s dip while noting the trend improvement in the Coincident Index.23 Skidoo
The Leading Economic Index has been in decline for 23 straight months, a run never-before seen outside a recession. The phrase 23 Skidoo has fallen out of the American lexicon, but it was once described as being perhaps the first truly national fad expression and, in its heyday, one of the most popular. It refers to leaving quickly or being forced to leave quickly by someone else. After 23 months of warning about a recession that has not materialized, it is tempting to give the ole 23 skidoo to this indicator. Yet the LEI is not the only example of a trusted bellwether signaling a recession, even as consumer spending helped the economy to avoid one.
The economy may not be headed for imminent recession, but it is losing momentum. The Leading Economic Index’s 0.4% decline in January corroborates the latest data showing activity only plodding forward into 2024 after sprinting for the better part of 2023. Retail sales, manufacturing production and residential construction all came in weaker than expected in January, while inflation was stronger than expected. The combination of slowing output and persistent price growth adds credence to a “higher for longer” interest rate environment, which would weigh on the already beleaguered LEI.