Quick Bites | Leading indicators in the US slowing

The US Weekly Economic Activity Index (WEI) is a composite of 10 weekly economic indicators used to gauge the strength of the US economy. As evident in the chart below, it has been slowing since mid-2021. Fading stimulus, recession worries, elevated inflation, and rising costs of borrowing are weighing on growth. This is intentional: the US Federal Reserve (Fed) is raising the cost of borrowing to curb inflation and has warned that it will lead to weaker economic growth. Historical trends suggest weak economic activity leads to lower growth and weaker markets follow. The WEI has fallen back below the pre-pandemic peak after the stimulus-driven boost. But as always, it is difficult to know whether the process is now close to concluding, and whether or not US economic activity is close to bottoming out. One would anticipate that markets would respond positively to an acknowledgement by the Fed that the tightening cycle was finally over.

Source: Blue Ocean

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