The U.S. economy is showing signs of resilience, despite the fact that the leading economic index has fallen for 19 months in a row. In October, the index dropped by 0.8%, but this did not deter economists from forecasting continued growth.
The steady increase in consumer spending has been a major factor in keeping the economy growing, even as inflation and rising interest rates have had negative effects. Despite this, the U.S. grew at an impressive 4.9% annual pace in the third quarter, which suggests that there is no impending breakdown in the economy on the horizon.
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 are likely to slow down economic growth and could even trigger an outright recession if left unchecked.
Looking ahead, experts predict that elevated inflation, high interest rates, and declining consumer spending due to depleting pandemic savings and mandatory student loan repayments will push the U.S. economy into a very short recession in the near future.
Despite these challenges, market reactions were positive on Monday as both the Dow Jones Industrial Average DJIA and S&P 500 SPX rose during trading sessions