An Economy Built on Quicksand

|October 25, 2023
house sinking with a downward arrow on background

This has easily been one of the strangest years in recent memory.

While the media insists that everything is just fine… and that we’ve gotten our soft landing

There’s a ton of data that suggests the economy is in trouble.

It’s impossible for both to be true.

And it doesn’t take much digging to figure out which signal is a mirage.

Let’s start with GDP, a go-to benchmark of economic health.

Percent Change in Real GDP Over Previous Quarter

If you look at only GDP, then, sure, it appears the economy is growing. But one chart… one data point… is not enough to give us the whole picture.

So let’s look at a much fuller portrait of our economy’s health.

The Conference Board’s Leading Economic Index (LEI) is a composite index of 10 financial and economic indicators. It gives us some insight into where the economy is headed.

A steady decline in the LEI is a clear sign of a weakening economy. And it often precedes the formal declaration of a recession by the National Bureau of Economic Research (the group Washington turns to for an official take on the economy).

So take a look at what the LEI has to say…

Conference Board Leading Economic Index

Not only is the LEI declining… but it has been for 18 straight months.

Despite what the GDP numbers (and the media) are saying, our economic fundamentals are weakening, not strengthening.

But wait… there’s more.

The chart above isn’t based on just one simple data point. Again… the LEI collects 10 indicators.

So let’s break things down even further.

The graph below shows the percent change in each piece of the LEI during September and the six-month period ending in September.

Percent Change of LEI Components

As you can see, there’s been a slowdown in several key economic factors.

Credit conditions have worsened… manufacturing activities have fallen… new issues of building permits have flatlined… and consumer economic expectations have turned pessimistic.

The overall picture is clear… Our economy looks very weak.

What little growth it has enjoyed over the past few quarters has been built atop quicksand… not solid rock. It’s going to take much more than a pivot in monetary policy to get us back on track.

Ditch the soft landing talk. We’re nowhere near out of the woods yet.

Anthony Summers
Anthony Summers

Anthony Summers is the Director of Strategic Trading for Manward Press and is a contributor to Manward Financial Digest, Manward Trading Tactics and Manward Letter. He is a former senior analyst for The Oxford Club, where he closely worked with some of our nation’s sharpest financial minds for nearly a decade. Anthony is a self-styled “conservatively aggressive trader” and has earned a reputation for developing unique trading strategies that focus on low-risk, high-return opportunities in both stock and options markets.