Index of Leading Indicators in U.S. Rises Less Than Forecast

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The index of U.S. leading indicators rose less than projected in May, a sign the world’s largest economy may take time to accelerate.

The Conference Board’s gauge of the outlook for the next three to six months increased 0.1 percent after a revised 0.8 percent gain in April that was higher than initially reported, the New York-based group said today. The median forecast of economists surveyed by Bloomberg called for a rise of 0.2 percent.

Automatic cuts in planned federal spending that began on March 1 are projected to weigh on economic growth this quarter. At the same time, the rebound in housing, rising stock prices and an improving job market mean households will sustain their spending, which accounts for about 70 percent of the economy.

“There are indications of a moderation in growth,” Jonathan Basile, a U.S. economist at Credit Suisse Holdings USA in New York, said before the report. “The slowdown will be temporary. It’s just going to take some time for the economy to turn up.”

Estimates of 45 economists in the Bloomberg survey ranged from no change to an increase of 0.5 percent.

Three of the 10 indicators in the leading index contributed to the increase, today’s report showed. The positives were stock prices, a credit index and the interest-rate spread between the federal funds rate and 10-year Treasury notes.

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Coincident Indicators

The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.2 percent after a 0.1 percent gain in the prior month.

The coincident index tracks payrolls, incomes, sales and production -- the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.

The gauge of lagging indicators increased 0.3 percent after a 0.1 percent gain the prior month.

“Growth will depend on continued improvement in the housing market and an easing of consumer and business caution, which would allow overall consumption and investment to gain traction,” Ken Goldstein, an economist at the Conference Board, said in a statement today.

More Americans than forecast filed applications for unemployment benefits last week, showing progress on reducing joblessness remains uneven amid slower growth this quarter. Jobless claims climbed by 18,000 to 354,000 in the week ended June 15 from a revised 336,000 the prior period, the Labor Department reported today in Washington.

United Technologies

United Technologies Corp. (UTX), the maker of Pratt & Whitney jet engines and Otis elevators, is among businesses seeing an improvement. The Hartford, Connecticut-based company said growth in housing and consumers’ growing ability to spend will help it to cushion the fallout of across-the-board federal budget cuts.

“Things are looking up in the U.S. economy,” Gregory Hayes, chief financial officer at United Technologies, said in a June 13 conference presentation. “We’ll see a little bit of impact” from the sequestration, he said, though “the rest of the economy is growing so well we don’t think it’s going to have a major impact on us.”

Federal Reserve policy makers said yesterday that they see “downside risks to the outlook for the economy and the labor market as having diminished since the fall,” which may mean trimming the Fed’s monthly bond-buying sometime this year.

“If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year,” Chairman Ben S. Bernanke said yesterday in a press conference at the conclusion of the two-day meeting of the Federal Open Market Committee.

The FOMC officials said for now they would maintain the $85 billion pace of monthly asset purchases and repeated that they’re prepared to increase or reduce the pace of purchases depending on the outlook for the job market and inflation.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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