Taps Coogan – June 23rd, 2023

The Conference Board’s benchmark Leading Economic Index, one of the relatively reliable leading indicators of recessions has just posted its 14th monthly contraction. Via LIz Ann Sonders:

Since 1961, we have been in recession every time the Economic Index has contracted for this long. Indeed, by this metric (and several others) we should already be in the severe phase of a recession.

While one can debate if we are flirting with a recession, that we had a mild technical recession last year, or that a recession is coming, we are pretty obviously not currently in the midst of a severe recession.

Part of the explanation for that disconnect derives from using year-over-year data sets that show big contractions relative to highly distorted data from 2022.

It’s also worth noting that the fiscal stimulus cycle is different this time around. Normally, Congress only approves huge stimulus bills during a severe recession but this time we’ve had roughly $2 trillion of dollars of non-Covid related stimulus in the last couple years proceeding a presumed recession (CHIPS Act, IRA, Infrastructure bill, etc…).

Nonetheless, indictors like this may mean exactly what they purport to mean: a nasty recession is coming.