U.S. leading indicators point to slowing economy
Business activity gauge down 0.5%
Merrill flags impact of house prices
NEW YORK—A closely watched gauge of future U.S. business activity fell more than expected in May, indicating slower economic growth may lie ahead later this year, a private research group announced yesterday.
The New York-based Conference Board reported that its composite index of leading indicators fell 0.5 per cent last month to 114.1. The decline was more than the 0.2 per cent drop that analysts had expected.
The May decline follows a revised unchanged level in April and a 0.6 per cent decline in March.
In a statement, Ken Goldstein, the board's labour economist, said that the indicators suggest "slower growth setting in during the third quarter." But he added that this is "not just a domestic phenomenon." He noted that six of the eight countries for which the Conference Board monitors a leading economic index have either showed declines or slower growth.
Mark Vittner, senior economist at Wachovia Corp. in Charlotte, N.C., said he's not worried, adding "this is a sign of a slower economy, but not anything more serious than that."
The Conference Board reported yesterday that only one of the 10 components of the leading index — stock prices — increased in May. The other components that dragged down the index included building permits, vendors performances, the index of consumer expectations, manufacturers' new orders for non-defence capital goods, consumer goods and materials and average weekly initial unemployment claims.
Separately yesterday, Merrill Lynch Co. said that U.S. economic growth could slow by a full percentage point next year if house prices stagnate in the biggest cities.
"What the regional data show, in our opinion, is that these `local' markets represent a big enough slice of economic activity that should they falter, we could see a fairly hefty impact on aggregate U.S. economic growth," Merrill Lynch economists Sheryl King and Claudia Lokody said in a report.
"Even if house prices just level off, this could potentially shave GDP growth by almost half a percentage point in 2005 and by more than a full percentage point in 2006."
from the star's wire services |
