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Leading Index Probably Rose in November in Sign U.S. Economy Will Pick Up

The index of U.S. leading economic indicators probably increased in November by the most in eight months, a signal the expansion will strengthen early next year, economists said before a report today.

The Conference Board’s gauge of the outlook for the next three to six months rose 1.1 percent after increasing 0.5 percent in each of the previous two months, according to the median forecast of 59 economists surveyed by Bloomberg News.

Americans grew more confident last month, stocks rose and fewer people filed for unemployment benefits, boosting the prospects for consumer spending in coming months. Until growth picks up and sparks bigger job gains, Federal Reserve policy makers will stick to a plan to pump more money into the economy.

The U.S. economy “is picking up momentum,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “We definitely had that lull in the summer and things appear to have turned.”

The New York-based Conference Board, a private research group, is scheduled to release its report at 10 a.m. Bloomberg survey estimates ranged from gains of 0.3 percent to 1.3 percent.

Evidence the economic recovery is advancing has driven up U.S. stock prices. The Standard & Poor’s 500 Index has advanced 22 percent since reaching a 10-month low on July 2. The gauge is up 5.3 percent so far in December.

Unemployment and Fed

Even so, Fed policy makers said economic growth isn’t strong enough to bring down the unemployment rate, which rose to 9.8 percent in November. The central bank’s Federal Open Market Committee on Dec. 14 repeated its pledge to leave the benchmark interest rate low for an “extended period” and retained a $600 billion Treasury-purchase program through June.

Seven of the 10 measures that make up the Conference Board’s leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. Of those, five contributed to the expected gain in November.

The Conference Board estimates new orders for consumer goods, bookings for capital equipment and money supply adjusted for inflation.

Those indicators that pointed to a gain in the November included a positive spread between short- and long-term interest rates, the increase in stocks, rising consumer expectations, fewer jobless claims and a lengthening in factory delivery times. The manufacturing workweek was unchanged at 40.3 hours in November, according to Labor Department data, while building permits declined.

Christmas Spending

Improved household balance sheets may be boosting spending during the Christmas holiday period. The International Council of Shopping Centers on Dec. 14 revised its November-December holiday-season sales forecast up by 0.5 percentage point to a range of 3.5 percent to 4 percent, citing “the strong November performance and promising trends in early December.”

“All the brands around the world are having, so far so good, a very great Christmas,” John Demsey, group president of Estee Lauder Cos., said in a Bloomberg Television interview Dec. 15. “Consumer confidence is up and it’s really about the power of the brands and pent up demand that consumers have.”

The pickup in consumer spending complements factory growth that helped bring the economy out of the worst recession since the 1930s.

Broadcom Corp., the biggest maker of chips for television set-top boxes, this week increased its fourth-quarter revenue projection to about $1.9 billion, the top end of an earlier forecast range. Irvine, California-based Broadcom is making inroads in the mobile-phone market, supplying radio chips for handsets from South Korea’s Samsung Electronics Co. and Finland’s Nokia Oyj.

                        Bloomberg Survey

=====================================
                               LEI

                              MOM%
=====================================

Date of Release              12/17
Observation Period            Nov.
-------------------------------------
Median                        1.1%
Average                       1.1%
High Forecast                 1.3%
Low Forecast                  0.3%
Number of Participants          59
Previous                      0.5%
-------------------------------------
4CAST Ltd.                    1.1%
Action Economics              1.0%
Aletti Gestielle SGR          1.2%
Ameriprise Financial Inc      1.2%
Bank of Tokyo- Mitsubishi     1.2%
Bantleon Bank AG              1.1%
Barclays Capital              1.2%
Bayerische Landesbank         1.1%
BBVA                          1.0%
BMO Capital Markets           0.8%
BNP Paribas                   1.0%
BofA Merrill Lynch Resear     1.0%
Briefing.com                  1.0%
Capital Economics             1.3%
Citi                          1.1%
Commerzbank AG                1.1%
Credit Suisse                 1.1%
Daiwa Securities America      1.2%
DekaBank                      1.3%
Desjardins Group              1.3%
Deutsche Bank Securities      1.1%
Deutsche Postbank AG          1.0%
DZ Bank                       1.2%
Fact & Opinion Economics      1.2%
First Trust Advisors          1.2%
Goldman, Sachs & Co.          1.2%
Helaba                        1.1%
Horizon Investments           1.3%
HSBC Markets                  1.0%
Hugh Johnson Advisors         0.9%
Ibersecurities                1.0%
IDEAglobal                    0.8%
Informa Global Markets        0.8%
ING Financial Markets         1.0%
Insight Economics             1.2%
Janney Montgomery Scott L     0.9%
Jefferies & Co.               1.0%
Landesbank Berlin             1.2%
Landesbank BW                 1.1%
Maria Fiorini Ramirez Inc     1.1%
MF Global                     1.2%
Mizuho Securities             0.9%
Moody’s Analytics             1.2%
Morgan Keegan & Co.           0.5%
Morgan Stanley & Co.          1.1%
PineBridge Investments        0.9%
PNC Bank                      0.7%
Raymond James                 1.3%
State Street Global Marke     1.3%
Stone & McCarthy Research     1.1%
TD Securities                 1.2%
Thomson Reuters/IFR           1.1%
Tullett Prebon                1.1%
UBS                           1.2%
University of Maryland        0.3%
Wells Fargo & Co.             1.1%
WestLB AG                     1.1%
Westpac Banking Co.           1.0%
Wrightson ICAP                1.1%
=====================================

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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