Despite the leading economic index declining 0.8% in October and falling for the 19th month in a row, the U.S. economy appears to be holding steady. Economists polled by the Wall Street Journal had predicted a 0.7% drop in the leading index, which is a gauge of 10 indicators designed to show whether the economy is improving or deteriorating. However, despite this losing streak, it seems that the U.S. economy is not any closer to a recession than when it began.
What has kept the economy growing is a steady increase in consumer spending during times of extremely low unemployment. This has offset the negative effects of high inflation and rising interest rates. In fact, the U.S. grew at an impressive 4.9% annual pace in the third quarter, which does not suggest an impending breakdown in the economy. However, with interest rates at their highest levels in years, it will be challenging for the economy to maintain its momentum moving forward. The Federal Reserve has raised a key short-term interest rate to combat inflation, but higher borrowing costs always slow down the economy and could potentially trigger an outright recession if not managed carefully.
Looking ahead, economists predict that elevated inflation, high interest rates, and contracting consumer spending – due to depleting pandemic savings and mandatory student loan repayments – could tip the U.S