The US economy is currently experiencing a 19-month losing streak as the leading economic index fell by 0.8% in October. Despite this, economists polled by the Wall Street Journal had predicted a drop of only 0.7%, indicating that the economy may not be as close to a recession as previously thought. The last time the index fell this many times in a row was during the Great Recession from 2007 to 2009.
The steady increase in consumer spending and low unemployment have been key factors in keeping the US economy growing despite high inflation and rising interest rates. However, with interest rates at their highest level in years, it will be difficult for the economy to maintain its momentum. The Federal Reserve has raised a key short-term interest rate in an attempt to curb inflation, but higher borrowing costs are likely to slow down the economy if not trigger an outright recession.
Looking ahead, the Conference Board expects elevated inflation, high interest rates, and contracting consumer spending due to depleting pandemic savings and mandatory student loan repayments to lead to a very short recession. Despite this, market reaction was positive on Monday as both the Dow Jones Industrial Average and S&P 500 rose in trading.