Remaining true to Harwood’s principle that business cycles matter is particularly important now, as our Business-Cycle Conditions model suggests some caution. Our index of leading indicators has fallen in the latest month and is at the neutral 50 level compared with 54 in the previous month (Chart 1). While that does not suggest a recession is imminent, it does reflect a weakened economy and the importance of closely monitoring economic conditions.
The weakness is a result of the ongoing crosscurrents of moderate growth in the core domestic economy partially offset by headwinds from slow global growth, a strong dollar, and weak commodity prices. Those headwinds are having significant negative impacts on U.S. exports and commodity-related industries.