An often-overlooked economic gauge showed on Friday that the US economy is heading for a recession – or already in one – as the Federal Reserve tries to curb inflation with a series of rapid interest rate hikes.
The Conference Board’s Leading Economic Indicators index showed that conditions deteriorated further in October, with the measurement down 0.8% from the previous month. That follows a 0.5% decline in September.
“The US LEI fell for the eighth month in a row, suggesting that the economy may be in recession,” said Ataman Ozyildirim, senior director of economic research at the Conference Board.
The downturn reflects a worsening sentiment among consumers, who are increasingly worried about steeper interest rates and sustained high inflation, as well as a prolonged slump in the housing market.
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An increase in Wall Street is expected to be the The Fed will trigger an economic downturn as he raises interest rates at the fastest pace in three decades to catch up with runaway inflation.
Officials this month approved a fourth consecutive 75-basis-point rate hike, raising the federal funds rate to a range of 3.75% to 4% – close to restrictive levels – and showed no signs of a pause in rate hikes. .
In a troubling development, the Fed’s rate hikes have failed to tame inflation: The government reported this month that the consumer price index rose 7.7% in October from a year earlier, hovering near a 40-year high .
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This indicates that the Fed will have to continue to chart its aggressive course, which would increase the chances of it crushing consumer demand and increasing unemployment.
“Let me say this,” Fed Chairman Jerome Powell told reporters earlier this month. “It’s too early to be thinking about a pause. When people hear delays, they think about pauses. It’s too early, in my opinion, to talk about pausing our rate hikes. There’s a way to go we.”
Hiking interest rates tend to create higher rates on consumer and business loans, which the economy slows by forcing employers to cut spending.
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Economic growth had already slowed in the first two quarters of the year, with gross domestic product — the broadest measure of goods and services produced in a nation — down 1.6% in the winter and 0.6% in the spring.
However, it picked up again over the summer, with GDP increasing by 2.6% on an annual basis in the three-month period from July to September.