Exploring Economic Indicators: June 2024 Recession Indicators

Economic indicators provide insight into the overall health and performance of an economy. They are essential tools for policymakers, advisors, investors, and businesses because they allow them to make informed decisions regarding business strategies and financial markets. In the week ending on July 18, the SPDR S&P 500 ETF Trust (SPY) fell 0.69%. The Invesco S&P 500 Equal Weight ETF (RSP) was up 1.48%.

In this article, we look at three indicators from the past week: retail sales, industrial production, and the Conference Board’s Leading Economic Index (LEI). At first, these indicators might seem unrelated. However, they all have a role in predicting economic trends. Retail sales and industrial production are among the “big four” recession-determining indicators recognized by the National Bureau of Economic Research (NBER). Additionally, the LEI serves as a forward-looking indicator. It offers insights into whether the economy is headed toward expansion or recession. There have been many conversations regarding a potential recession over the past few years, though one has yet to materialize. These indicators, among others, will remain an important part of the ongoing discussion.

Retail Sales

American consumer spending was unchanged last month. But a closer look at the underlying data points to strong and resilient shoppers. Retail sales were flat in June, higher than the anticipated 0.3% decline in consumer spending. Consumer spending dropped significantly at gas stations (-3.0%) and for motor vehicles and parts (-2.0%). Meanwhile, almost all other sectors showed a pickup in consumer spending. That was led by nonstore retailers (1.9%) and building materials (1.4%).

Core retail sales (excluding automobiles) were up 0.4% from May, exceeding the expected 0.1% growth. Lastly, control purchases, which is thought to be an even more “core” view of retail sales, were up 0.9% from May. That surpassed the expected 0.2% growth. This series typically does not garner as much attention as the headline and core figures. But control purchases are a more consistent and reliable reading of the economy because. That's because it strips out many volatile components.

Overall, the data provided a good balance to the Fed’s monetary policy decisions. The latest retail sales data showed the economy is not headed toward a sharp slowdown as well as kept a September rate cut as a realistic probability.

Retail sales will have an impact on the interest in the SPDR S&P Retail ETF (XRT), VanEck Retail ETF (RTH), Amplify Online Retail ETF (IBUY), and ProShares Online Retail ETF (ONLN).