In World Economy News 22/05/2015
The index of U.S. leading economic indicators rose in April by the most in nine months, a sign of vitality in the world’s largest economy.
The Conference Board’s gauge for the next three to six months climbed 0.7 percent after a 0.4 percent advance in March that was larger than previously reported, the New York-based group said Thursday. The median forecast of 45 economists surveyed by Bloomberg was for a 0.3 percent increase.
The reading suggests that the economy is set to pick up after a sluggish first quarter that was cursed by bad weather and a labor dispute at West Coast ports. While weakness in manufacturing will probably limit how fast the economy can grow, the highest level of homebuilding permits since June 2008 indicates housing will help pick up some of the slack.
“April’s sharp increase in the LEI seems to have helped stabilize its slowing trend, suggesting the paltry economic growth in the first quarter may be temporary,” Ataman Ozyildirim, an economist at the Conference Board, said in a statement. “The improvement in building permits helped to drive the index up this month, but gains in other components, in particular the financial indicators, have been somewhat more muted.”
Estimates in the Bloomberg survey ranged from increases of 0.1 percent to 0.7 percent after a previously reported March gain of 0.2 percent.
Seven Increase
Seven of the 10 indicators in the Conference Board’s measure contributed to the April gain, led by building permits, fewer jobless claims and low interest rates.
The group’s index of coincident indicators, which tracks current economic activity, increased 0.2 percent in April after falling 0.1 percent. The gauge measures payrolls, incomes, sales and production.
The index of lagging indicators rose 0.1 percent in April.
News that the U.S. economy sputtered last quarter, combined with uneven employment gains, shook households’ confidence this month, raising concerns that spending will be slow to pick up. A strong dollar and weak oil prices also are impairing manufacturing activity, decreasing the odds of a quick rebound in the rate of expansion.
Other sectors are showing improvement. Housing starts unexpectedly surged more than 20 percent in April from a month earlier to the strongest pace since 2007. Building permits advanced 10 percent to a 1.14 million rate.
Housing Market
At the same time, it would take persistently sizeable gains for housing to be the vital spark to growth and compensate for weakness in manufacturing, as residential construction constitutes less than 4 percent of the economy.
The median forecast of economists surveyed by Bloomberg since the government’s last growth estimate indicates GDP shrank at a 0.9 percent annualized rate from January through March. That would be the worst performance in a year, when bad winter weather again depressed growth. Revised Commerce Department figures are due May 29.
