Advance in U.S. Leading Index Signals Recovery to Pick Up in Second Half
U.S. Economic Indicators Climbed 0.3%
Jim R. Bounds/Bloomberg
Sales at retailers stagnated in June, while the S&P 500 average fell 3.8 percent from the prior month.
Sales at retailers stagnated in June, while the S&P 500 average fell 3.8 percent from the prior month. Photographer: Jim R. Bounds/Bloomberg
July 13 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke speaks before the House Financial Services Committee about the U.S. economy and outlook. Bernanke, delivering his semiannual monetary report in Washington, also spoke about the Fed's readiness to add stimulus measures to spur economic growth and warned policymakers about the risk of debt default. (Source: Bloomberg)
Leading Economic Indicators Index in U.S. Climbed 0.3%
David Paul Morris/Bloomberg
Cheaper fuel costs, an easing of supply bottlenecks after the Japan earthquake and better weather may combine to help give the recovery a boost.
Cheaper fuel costs, an easing of supply bottlenecks after the Japan earthquake and better weather may combine to help give the recovery a boost. Photographer: David Paul Morris/Bloomberg
The index of U.S. leading indicators rose in June, confirming the Federal Reserve’s forecast that the economy will pick up in the second half of the year.
The Conference Board’s gauge of the outlook for the next three to six months climbed 0.3 percent after a 0.8 percent gain in May, the New York-based research group said today. Jobless claims rose more than forecast and consumer confidence stagnated last week, while manufacturing in the Philadelphia area rebounded this month, other reports showed.
Cheaper fuel costs, an easing of supply bottlenecks after the Japan earthquake and better weather may combine to help give the recovery a boost. At the same time, a reluctance to ramp up hiring and limited income growth may restrain consumer purchases, the biggest part of the economy.
The economy “is not falling apart but not showing any great signs of reacceleration either,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “We’re in the doldrums. It is consistent with sluggish growth.”
Economists projected a 0.2 percent rise in the June leading index, according to the median forecast in a Bloomberg News survey. Estimates of the 51 economists ranged from a drop of 0.1 percent to an increase of 0.6 percent.
Stocks rallied as European officials announced a plan that will give additional aid to Greece and as Morgan Stanley’s results beat estimates. The Standard & Poor’s 500 Index climbed 1.4 percent to 1,343.8 at the 4 p.m. close in New York.
Manufacturing in the Philadelphia area rebounded in July from its first contraction this year, a sign the industry is recovering from earlier supply shortages caused by Japan’s earthquake in March, another report today showed.
Philadelphia Manufacturing
The Federal Reserve Bank of Philadelphia’s general economic index rose to 3.2 from minus 7.7 the prior month. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
The labor market is struggling to gain momentum. Initial jobless claims increased by 10,000 to 418,000 last week, the Labor Department said today.
“The labor market is still quite fragile,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, who correctly forecast the rise in claims. “The pace of firings continues to move sideways and it’s obvious there is not a lot of hiring going on. There is not a lot of demand right now.”
The lack of hiring helps explain why consumers have little to cheer about. Consumer sentiment was little changed last week as Americans’ optimism over their current finances clashed with growing pessimism about the state of the economy. The Bloomberg Consumer Comfort Index was minus 43.3 in the period to July 17, the highest since April, compared with minus 43.9 the prior week.
Five Gain
Five of the 10 components of the Conference Board’s leading index contributed to the June gain. The biggest contribution came from an increase in the money supply followed by a positive spread between short- and long-term interest rates and a gain in building permits.
Declines in stock prices, consumer expectations, orders for capital equipment and factory hours weighed on the measure.
Fed Chairman Ben S. Bernanke said this month that “disappointing” job growth in May and June were due to temporary effects that included higher energy costs and parts shortages from Japan.
“Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation,” Bernanke told the House Financial Services Committee on July 13.
Retailers ‘Cautious’
Retailers are “cautious” about the U.S. economy, according to David Hargreaves, chief operating officer of Pawtucket, Rhode Island-based Hasbro Inc. (HAS)
“In the U.S. we’re two years out of recession, unemployment is increasing, under-employment is increasing, house prices are still going down,” Hargreaves said on a July 18 conference call with analysts. “Retailers will be appropriately cautious as they go into the end of the year.”
The U.S. economy, the world’s largest, expanded at a 1.9 percent annual rate in the first quarter, the slowest in almost a year. Gross domestic product rose 2 percent in the following three months, according to a Bloomberg survey of economists from June 28 to July 7.
It may average 3.2 percent in the second half of the year, the median projection in the survey showed.
To contact the reporter on this story: Jillian Berman in Washington at jberman13@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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