The US economy has been growing steadily, despite a decline of 0.8% in the leading economic index in October. This marks the 19th month in a row that the index has fallen, but economists polled by the Wall Street Journal had predicted a drop of only 0.7%. During this time, consumer spending has increased at a steady pace, offsetting the negative effects of high inflation and rising interest rates.
The US economy grew at an annual pace of 4.9% in the third quarter, which is not a sign of an impending recession. However, with interest rates at their highest level in years, it will be challenging for the economy to maintain its momentum. The Federal Reserve raised a key short-term interest rate to combat inflation, but higher borrowing costs can slow down the economy and even trigger an outright recession if left unchecked.
Looking ahead, experts predict that elevated inflation, high interest rates, and contracting consumer spending due to depleting pandemic savings and mandatory student loan repayments will lead to a very short recession in the US economy. Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, made this prediction based on her analysis of market trends.
In response to this news, the Dow Jones Industrial Average DJIA and S&P 500 SPX rose in Monday trading. Despite concerns about economic growth, investors remain optimistic about the future prospects of these two major stock market indices.