Key Forecasting Gauge Rose in June
Thursday July 19, 1:54 pm Eastern Time
By Mark Wilkinson
<<WASHINGTON (Reuters) - A key forecasting gauge for the U.S. economy rose for the third consecutive month in June, while data of current economic trends suggested the economy was stabilizing, a private research firm said on Thursday.
The Conference Board reported that the U.S. index of leading economic indicators rose 0.3 percent in June after being up 0.4 percent in May -- a rise above Wall Street expectations of a 0.2 percent increase.
The Board also reported that the coincident index, which measures current economic trends, dropped 0.1 percent in June after being unchanged the previous month.
Ken Goldstein, the Board's chief economist, noted that the coincident index has remained relatively flat since the beginning of the year, which suggests that the economy is stabilizing, as the Federal Reserve's Chairman Alan Greenspan told Congress on Wednesday.
``The overall picture is that we're close to if not already have already hit bottom,'' Goldstein told Reuters. ``We're about to move off of the bottom, maybe not sharply but we're starting to move off the bottom.''
``The (coincident index) does point to a bottoming in economic activity and the question is whether this bottoming will be positive or negative growth,'' Richard Berner, Chief Economist at Morgan Stanley Dean Witter in New York, told Reuters.
``So far data in the second quarter is pointing to positive growth,'' Berner added, citing data released by the Commerce Department earlier on Thursday showing that the U.S. May trade deficit shrank to its lowest level since January of 2000.
David Huether, an economist with the National Association of Manufacturers, said the trade deficit data was not necessarily good news, as it was caused by lower imports that were in turn caused by a drop in manufacturing output in the second quarter.
MANUFACTURING AND HOUSING
Goldstein and Berner said the manufacturing downturn could be coming to an end soon as the bulk of inventory corrections seems to be over.
``The most intensive inventory correction is behind us,'' Berner said. ``I think that we're probably going to see a picture in which correction goes from five or six annual rate of decline in the second quarter, to positive growth in the fourth quarter,'' he added.
``Manufacturing has been a problem for quite a few months, and the problem basically was to try to get inventories down,'' Goldstein said. ``Don't be surprised even as early as July if we begin to see a little bit of a turnaround,'' he added, citing recent positive durable goods orders data.
While the Board's report indicated a slowdown in the housing market with a drop in building permits, Goldstein said the sector was cooling off after a period of very high performance.
``Maybe what's going on there is not so much the onset of a downward spiral as moving down to a sustainable trend,'' he said.
CONSUMER CONFIDENCE
``Consumer confidence has been rather stable and surprisingly so in the sense that we haven't had terrific news out of the labor market,'' Goldstein said, adding that he did not expect consumers to stop spending this summer.
Berner said he expected ``lackluster consumer spending for the next few months, but probably not a retrenchment.''
The day after Greenspan spoke on the future of the economy, seeing growth picking up toward the end of the year, Goldstein said the effects of the six interest rate cuts the Fed made this year will begin to kick in over the remainder of the year.
Five of the 10 components that make up the leading indicators index rose in June, led by the money supply, slower deliveries and the Treasury yield curve. The remaining components posted decreases in June, led by stock prices, building permits and the average workweek, the Board said.>> |
