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U.S. Economy: Leading Indicators Index Rise More Than Forecast
2010-01-21 16:59:01.304 GMT
By Timothy R. Homan
Jan. 21 (Bloomberg) -- The index of U.S. leading
indicators rose more than anticipated in December, a sign the
economy will keep growing through the first half of the year.
The New York-based Conference Board's gauge of the outlook
for the next three to six months climbed 1.1 percent, the most
in three months, after increasing 1 percent in November. The
gain exceeded the median forecast in a Bloomberg News survey
for a 0.7 percent rise. Another report showed Philadelphia-area
manufacturing expanded in January for a fifth straight month.
Fewer firings, rising stock prices and Federal Reserve
efforts to keep interest rates low propelled the leading index,
while growth in exports and inventories have spurred
production. Sustained demand and faster economic growth will
hinge on employment gains that have yet to materialize.
"The economic recovery still has momentum," said Tim
Quinlan, an economist at Wells Fargo Securities LLC in
Charlotte, North Carolina, who correctly forecast the December
gain. "Right now, the linchpin is confidence. Both businesses
and consumers need to feel like it's a worthwhile thing to
start spending money again."
U.S. stocks slumped for a second day as President Barack
Obama proposed limiting the size and trading activities of
financial institutions and on concern China will take more
steps to cool off its economy. Standard & Poor's 500 Index
dropped 1.8 percent to 1,118.14at 11:57 a.m. in New York.
Treasury securities rose.
China's economy expanded from October through December at
the fastest pace since 2007, the statistics bureau in Beijing
reported. Such growth is helping drive exports and boost sales
for U.S. factories.
Manufacturing Expansion
Manufacturing in the Philadelphia area grew in January,
corroborating figures last week showing expansion at factories
in the New York region. The Fed Bank of Philadelphia's general
economic index of manufacturing in the area fell to 15.2 this
month from 22.5 in December.
The index was less than the 18 reading economists had
expected, according to the median estimate in a Bloomberg
survey. Figures greater than zero signal growth. The report
showed a measure of employment rose to the highest level in
almost two years.
Labor Department figures today showed jobless claims
unexpectedly increased to 482,000 last week from 446,000 a week
earlier, reflecting a backlog of applications from the year-end
holidays.
Economists surveyed by Bloomberg projected the leading
indicators index would increase 0.7 percent from a previously
reported 0.9 percent gain in November, according to the median
of 58 estimates. Forecasts for the index, which has increased
nine straight months, ranged from gains of 0.3 percent to 1.1
percent.
Eight Indicators Rise
Eight of the 10 indicators in the leading index
contributed to the increase, led by the difference between
long-term and short-term interest rates, building permits and a
drop in jobless claims in December. None of the indicators fell
during the month.
The Conference Board's index of coincident indicators, a
gauge of current economic activity, rose 0.1 percent in
December for a third month. The index tracks payrolls, incomes,
sales and production, the measures used by the National Bureau
of Economic Research to determine the beginning and end of U.S.
recessions.
The world's largest economy will probably expand at a 2.7
percent annual pace from January through March and at a 2.9
percent rate in the following quarter, according to the median
estimate of economists surveyed by Bloomberg earlier this
month.
Darda Optimistic
Michael Darda, chief economist at MKM Partners LP in
Greenwich, Connecticut, is more optimistic. He said in an
interview with Bloomberg Radio today that the economy will
expand 4 percent this year, mirroring rebounds from recessions
in the 1970s and 1980s.
Darda said growth will be ignited by the "initial spark"
from a recovery in capital markets and corporate earnings, as
well as the rebuilding of inventories. The job market will
recover more slowly, with unemployment falling to about 9
percent by the end of this year from 10 percent in December, he
said.
Seven of 10 indicators for the leading index are known
ahead of time: stock prices, jobless claims, building permits,
consumer expectations, the yield curve, factory hours and
supplier delivery times.
Jobless claims averaged 460,250 in December, down from
480,750 a month earlier. U.S. stocks continued to rise last
month as reports suggested the economy was improving. The S&P
500 averaged 1,110.38 in December, compared with 1,088.07 the
previous month. The index reached the highest closing level in
14 months on Dec. 28.
Building Permits
Applications for building permits rose 11 percent to a
653,000 annual rate last month, the most since October 2008,
the Commerce Department said yesterday.
"We are seeing stabilization in the economy," Brian
Moynihan, chief executive of Bank of America Corp., said
yesterday in an interview. The head of the largest U.S. lender,
said the economy is still "fragile."
Reiterating their pledge to keep interest rates
"exceptionally low" for "an extended period," Fed policy
makers last month said the recovery faced hurdles.
The central bankers, who next meet Jan. 26-27 in
Washington, will keep their target for overnight lending among
banks unchanged through September before raising it by half a
point in the fourth quarter, according to the median forecast
of economists surveyed this month. The Fed has kept the
benchmark rate near zero since December 2008.
For Related News and Information:
Search for stories on the U.S. economy: NI USECO <GO>
Stories on manufacturing: TNI US MAC <GO>
Stories on the Federal Reserve: NI FED BN <GO>
Bloomberg News about companies' earnings: TNI COS ERN BN <GO>
U.S. economy forecasts: OUTL US <GO>
U.S. GDP figures: GDP US <GO>
--With assistance from Scott Lanman and Vincent Del Giudice in
Washington, Rachel Layne in Boston, Thomas Keene in New York
and
Will Daley in Chicago. Editors: Vince Golle, Carlos Torres
To contact the reporter on this story:
Timothy R. Homan in Washington at +1-202-624-1961 or
thoman1@bloomberg.net
To contact the editor responsible for this story:
Christopher Wellisz at +1-202-624-1862 or
cwellisz@bloomberg.net
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