2 months in a row...U.S. Leading Indicators Gain 0.4%, More Than Forecast (Update1)
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By Courtney Schlisserman
Feb. 19 (Bloomberg) -- The index of leading U.S. economic indicators rose more than expected in January, led by a jump in money supply that masked continued deterioration elsewhere in the economy.
The Conference Board’s gauge rose 0.4 percent, the most since December 2006, after a revised 0.2 percent increase this past December, the New York-based group said today. The index is designed to show the likely direction of the economy over the next three to six months. Most of the January gain was because of money supply and the yield curve, the Conference Board said.
Increased lending and purchases of securities by the Federal Reserve have boosted the real money supply, the biggest component of the leading index. President Barack Obama this week signed into law a $787 billion economic stimulus package and unveiled a plan to help Americans keep their homes by cutting mortgage payments and encouraging loan revisions.
“Things are still very weak for the economy in the near term,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “You’ve got the Fed doing its job, you’ve got stimulus. And all those things should hopefully do their job by the end of the year.”
Economists forecast the index would gain 0.1 percent, according to the median of 52 projections in a Bloomberg News survey. Estimates ranged from a drop of 0.3 percent to a gain of 0.4 percent.
Philadelphia Factories
Separately today, the Fed Bank of Philadelphia said its measure of manufacturing in that region shrank in February at the fastest pace in more than 18 years as employment and sales plunged to record lows.
Seven of the 10 indicators for the leading indicators gauge are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. The Conference Board estimates new orders for consumer goods, bookings for capital goods and the money supply adjusted for inflation.
Five of the indicators in today’s report added to the index. In addition to money supply and the yield curve, consumer expectations, new orders for non-defense capital goods and consumer goods added to the gauge.
Money supply added 0.54 percentage point to the January gauge and the yield curve added 0.23 percentage point.
Jobs, Housing
The number of Americans filing first-time claims for unemployment benefits averaged 583,400 in January, up from 552,900 a month earlier. That subtracted 0.16 percentage point from the leading index. Reports point to the labor market continuing to act as a drag on the economy. First-time claims held at 627,000 last week, the Labor Department said today.
Building permits subtracted 0.13 percentage point from the gauge and the Standard & Poor’s 500 Index cut 0.05 percentage point. The Commerce Department yesterday said building permits, like housing starts, reached a record low annual rate in January.
Obama yesterday pledged $275 billion to a housing rescue that includes cutting mortgage payments for as many as 9 million struggling homeowners and expanding the role of Fannie Mae and Freddie Mac in curbing foreclosures. On Feb. 17, he signed the stimulus package, which provides tax breaks and government spending intended to resuscitate the U.S. economy.
‘Anemic Growth’
The U.S. economy contracted at a 3.8 percent annual pace in the fourth quarter, the most since 1982, according to Commerce figures released on Jan. 30. Economists surveyed by Bloomberg in February said gross domestic product will fall in the first half of the year and then start to improve the last six months.
“The economy has been in recession for over a year, but the level of intensity may begin to ease over the next few months,” Ken Goldstein, an economist at the Conference Board, said in a statement. “The second half of 2009 may see a period of anemic growth.”
The Federal Reserve in January held the overnight lending rate between banks at a range between zero and 0.25 percent. Last week, the central bank and the Treasury said they may expand a new program to spur consumer and business loans to as much as $1 trillion, from the original $200 billion.
“We believe this intervention to support credit markets will make a big difference in stabilizing the economy,” Fed Bank of Cleveland President Sandra Pianalto said in a speech on Feb. 18. She said the economy is unlikely to recover “until we see stability return to the housing and financial markets.”
Manufacturing Jobs
The factory work week slipped in January to 39.8 hours and subtracted 0.06 percentage point from the leading index. Supplier delivery times also subtracted from the index.
General Motors Corp. said yesterday it plans to eliminate 47,000 more jobs worldwide this year as it closes plants and moves to dispose of brands. Chief Financial Officer Ray Young said yesterday that the company, seeking as much as $16.6 billion in new federal loans, expects cost-saving talks with union leaders and bondholders to move “at a higher pace” as the government seeks to join the discussions.
Chrysler LLC, also propped up with federal assistance, said it’s seeking $5 billion more from the government and will reduce 3,000 more positions.
The Conference Board’s index of coincident indicators, a gauge of current economic activity, fell 0.5 percent for a third straight month. The index tracks payrolls, incomes, sales and production.
The gauge of lagging indicators declined 0.1 percent after falling 0.2 percent in the prior month. That index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit. |
