Leading Indicators Fell Sharply in December in Start to Economic Week Featuring 4Q GDP and Inflation Data

A forward-looking gauge of economic activity fell sharply in December, showing the U.S. economy weakened markedly as the year ended, the Conference Board reported on

Monday. The business organization’s leading economic index fell 1% from November, when it dropped by 1.1%. "The US LEI fell sharply again in December – continuing to

signal recession for the US economy in the near term," said Ataman Ozyildirim, senior director, economics, at the board. "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.” “Overall economic activity

is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023,” he added. However, the American consumer has proven resilient amid

the strain of higher borrowing costs and elevated prices for necessities. A drop in the price of gasoline from last summer’s peaks and continued improvement in the inflation data

has some economists believing the Federal Reserve can pull off a “soft landing” where inflation recedes and the economy does not go into a recession. The Fed meets next

week to consider raising interest rates, with most experts calling for a quarter point increase following December’s 50-basis-point hike. That would be a slowing in the pace of

increases and bring the Fed closer, in the minds of investors, to an end of its most aggressive monetary tightening in decades. Still, key Fed officials in recent days have

emphasized that a reduction in the level of rate hikes does not suggest a pause or a pivot to cutting rates should the economy worsen.