Ignore LEI's scaremongering

Wells Fargo Research Team Wells Fargo

Summary

The Leading Economic Index sank in September to a level last seen in 2016. This once-widely followed gauge has a credibility problem. We maintain that the U.S economy is achieving a soft landing, but even if a recession were to start tomorrow, it would not redeem the fact that for more than two and a half years the LEI has cried wolf.

Old habits die hard

The Leading Economic Index (LEI) declined 0.5% to 99.7 in September. This marks the first time the index has been below 100 since 2016. The LEI has looked disjointed, as it conflicts with the economic narratives of other conventional forecasts, including even the Fed's Summary of Economic Projections. While the LEI has been in persistent decline for two and a half years, the economic outlook and prospects for a soft landing have only increased. Indeed, the LEI has remained weak even as GDP has demonstrated broad resilience of the economy.

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Wells Fargo Research Team

Wells Fargo

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