The Conference Board on Tuesday abandoned a long-running call for the U.S. economy to fall into recession, although its Leading Economic Index still sees economic output flatlining in the months ahead.

The business research group’s index, meant to be a gauge of future economic activity, fell 0.4% in January to 102.7, the lowest level since April 2020 when the U.S. was in a brief recession after the onset of the COVID-19 pandemic and related shutdowns.

It was the 23rd consecutive monthly decline, just one month short of the record-long slump that began in April 2007 and ran through March 2009 during the global financial crisis. The LEI’s six-month annualized rate of decline, however, has slowed sharply and the growth rate is around its least negative since August 2022.

“While the declining LEI continues to signal headwinds to economic activity, for the first time in the past two years, six out of its 10 components were positive contributors over the past 6-month period,” said Justyna Zabinska-La Monica, senior manager, business cycle indicators at the Conference Board. “As a result, the leading index currently does not signal recession ahead.”

Growth in the second and third quarters, however, should be near zero, she said.

The Conference Board first announced in July 2022 that the index signaled a recession was coming. It had repeated that forecast with each month’s report until Tuesday’s release for January, even as U.S. economic output, job creation and consumer spending all continued at above-trend levels throughout and no recession has materialized.

The largest positive contributor to the turn from a recession forecast came from the recent surge in stock prices to record highs. The benchmark S&P 500 index (.SPX), opens new tab has risen by more than 20% since late October after signals from the Federal Reserve that its aggressive interest rate cycle aimed at containing inflation is over and that rate cuts are expected this year.

Persistently low numbers of new filings for unemployment benefits and measures of future credit availability, home building permits and new orders of manufactured goods also contributed to the change in the outlook.

Matthew Martin, U.S. economist at Oxford Economics, noted the continued decline in the overall index is now being led by a narrow group of indicators that are poised to turn higher in the months ahead.

“The economy remains in growth mode, and the outlook continues to be optimistic due to the strength of the labor market, easing in financial market conditions, and robust consumer spending heading into 2024,” Martin wrote in a note after the LEI release. “We estimate (first-quarter) consumption growth is tracking at 2.1% annualized, lower than our baseline forecast of 2.5%, though that would still be consistent with solid Q1 GDP growth of 2%.”

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