The Conference Board’s “U.S. Leading Economic Index and Consumer Confidence” says it sees a pick-up in the U.S. economy this year. CB expects the economy to grow about 3%. Growth has moderated but inflation appears under reasonable control and seems to have shaken off the burdens of cyclical dynamics says the firm. CB expects corporate profitability to peak this year and that overall profit gains should remain solid for the foreseeable future. However, as compensation costs rise and productivity gains wane, job growth picks up. This can put upward pressure on compensation when the unemployment rate is low. CB says the tensions created by trying to cover rising costs with higher prices have put businesses and the Fed on a collision course that suggests higher interest rates and lower profits lie ahead.
The Conference Board released an analysis today that shows that economic indicators are pointing to slow growth ahead in the U.S., but not a recession. The CB says the challenge for both the Federal Reserve Board and the U.S. economy is that this period of sub-par growth is likely to have little impact on inflation and short-term interest rates. One of the biggest disconnects in the U.S. economy has been between the rapid growth in the capital goods and manufacturing sectors and the systemic weakness of the consumer sector. Meanwhile, corporate profitability is making stunning gains. Over the past three months, The Conference Board index of leading economic indicators has turned down relative to its level six months ago for the first time in this expansion.
The Conference Board said Wednesday that a so-called “double-dip recession” in the U.S. is practically impossible without some unexpected external shock to consumer prices or national security. In many ways a more comprehensive measure of economic activity than Gross Domestic Product, the CEI is made up of industrial production, employment, manufacturing and trade sales, and personal income.