Three Recession Indicators to Watch for Investors

Gauging Economic Health

• 💡 Economists and market watchers use several signals to gauge the health of the economy.
• 🎯 Consumer spending, which constitutes about 70% of GDP, can be an early indicator of an economic downturn.
• 🧠 Consumer sentiment also provides hints about future consumer behavior.

Key Recession Indicators

• ⚠️ The Federal Reserve's favorite recession gauge is the spread between long and short-term borrowing costs; an inversion has reliably preceded recessions.
• 📈 This gauge experienced a long inversion that ended in late 2024, but it is now back in positive territory, with a false alarm in 2022.
• 📉 Changes in unemployment can also signal an impending recession.

Current Economic Outlook

• 📊 The indicator based on the SAM rule shows declining recession risk as of March, reflecting a resilient labor market.
• 🧐 While a recession is possible in the near future, there is insufficient data to confirm if one is imminent.