Economic index flashes major recession warning sign

An often-overlooked economic indicator showed on Friday that the US economy is heading for or already in recession as the Federal Reserve seeks to curb inflation with a series of sharp interest rate hikes.

The Conference Board’s index of leading economic indicators showed that conditions worsened further in October, falling 0.8% from the previous month. This follows a 0.5% decline in September.

“The US LEI fell for the eighth straight month, suggesting the economy may be in a recession,” said Ataman Ozildirim, senior director of economic research at The Conference Board.

The decline reflects a worsening outlook for consumers, who are increasingly worried about higher interest rates and stubbornly high inflation, as well as a prolonged downturn in the housing market.

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DEMOCRATS EXPLAIN ‘DANGEROUS’ FED RATE HIKE, WARN OF LARGE JOB LOSSES

US grocery shoppers

Shoppers are seen at a Kroger supermarket in Atlanta, Georgia on October 14, 2022. (Elijah Nouvelage/AFP/Getty Images)

It is increasingly expected on Wall Street that The Fed will cause the economy to go into recession as it raises interest rates at the fastest pace in three decades to catch up with soaring inflation.

Officials this month approved a fourth straight rate hike of 75 basis points, raising the federal funds rate to a range of 3.75% to 4%, close to the cap, and showed no signs of stopping rate hikes.

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In a worrying development, the Fed’s rate hikes have so far failed to rein in 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.

The Fed raises interest rates BY 75 BASIS POINTS for the fourth month in a row

This indicates that the Fed will need to continue its aggressive course, raising the prospect that it will crush consumer demand and cause unemployment to rise.

“Let me say this,” Fed Chairman Jerome Powell told reporters earlier this month. “It’s very early to think about a pause. When people hear delays, they think about pauses. I think it’s very early to talk about stopping our rate hikes. We have a ways to go.”

A rise in interest rates tends to result in higher rates for consumer and business loans, which slows down the economy forcing employers to cut costs.

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Economic growth already contracted in the first two quarters of the year, with gross domestic product, the broadest measure of goods and services produced in the country, falling by 1.6% in the winter and 0.6% in spring.

However, it rebounded in the summer, with GDP growing by an annualized 2.6% in the three-month period from July to September.

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