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Leading Economic Indicators Index in U.S. Rose 1.4%

Manufacturing stair treads in North Carolina
Domingo Gomez rubs grout into terrazzo faux-marble stair treads at Precast Terrazzo Enterprises Inc. in Raleigh, North Carolina in this file photo. Photographer: Jim R. Bounds/Bloomberg

The index of U.S. leading indicators rose in March by the most in 10 months, a sign the economy will keep growing into the second half of the year.

The 1.4 percent increase in the New York-based Conference Board’s measure of the outlook for three to six months was more than anticipated and followed a revised 0.4 percent gain in February.

Manufacturers are ratcheting up production and factory workers are putting in longer hours as companies rebuild inventories and ship more goods overseas. Further improvement in the job market is needed to help sustain the economy’s recovery from the worst recession since the 1930s.

“It’s one of the indicators signaling a very rapid pace of expansion,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York, who correctly forecast the gain in the leading index. The figure “certainly offers hope that the recovery may be more swift,” he said.

The gain in March compared with a median estimate of 1.1 percent by 51 economists surveyed by Bloomberg News. Estimates ranged from gains of 0.5 percent to 1.5 percent. Last month’s increase was the biggest since a similar rise in May 2009.

Stocks rose for the seventh day in the past eight, with the Standard & Poor’s 500 Index gaining 0.5 percent to 1,197.52 at 4:10 p.m. in New York.

Seven Indicators Rise

Seven of the 10 indicators in the leading index contributed to the gain, led by the interest-rate spread, an increase in factory hours, slower supplier deliveries, gains in stock prices and rising building permits. Shrinking money supply, fewer orders for capital goods and a drop in consumer expectations weighed on the index.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.1 percent in March for a second month. The 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.

“Payroll employment made its first substantial contribution to the coincident economic index, suggesting a recovery that is beginning to gain traction,” Ataman Ozyildirim, an economist at the Conference Board, said in the news release.

Yield Spread

The positive spread between the yield on the 10-year Treasury note and the overnight fed funds rate reflects investor expectations the economy will keep improving.

The supplier delivery index, a component of the Institute for Supply Management’s factory survey, rose in March to the highest level since June 2004, indicating slower delivery times as demand mounts.

The S&P 500 averaged 1,152.05 in March, compared 1,089.16 in February. The index gained 8.7 percent this year through April 15.

Building permits in March rose 7.5 percent to a 685,000 annual pace, the biggest gain since December, from the prior month, the Commerce Department reported last week.

Average weekly initial jobless claims fell to 448,000 last month from 467,500 in February, a sign firings were easing. Payrolls rose 162,000 in March, the biggest monthly gain in three years, Labor Department figures showed April 2.

JPMorgan Hiring

JPMorgan Chase & Co. is among companies hiring. JPMorgan’s President Jamie Dimon last week announced plans to hire nearly 9,000 employees in the U.S. alone and more abroad as first quarter earnings rose 55 percent to $3.33 billion from a year earlier.

“While the economy still faces challenges, there have been clear and broad-based improvements in underlying trends,” Dimon said in a statement.

Dean Maki, chief U.S. economist at Barclays Capital Inc. last week raised his forecast for U.S. growth this year to 3.8 percent from a prior estimate of 3.5 percent.

Economists surveyed by Bloomberg in the first week of April forecast the economy would expand at a 3 percent rate this year, compared with last year’s 2.4 percent contraction.

The gauge of lagging indicators increased 0.2 percent last month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.

Fed on Economy

The Federal Reserve last week said the economy expanded “somewhat” across most of the U.S. in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed.

Fed Chairman Ben S. Bernanke told lawmakers there were “significant restraints” on a recovery he said would be “moderate” over the coming quarters.

Seven of the 10 indicators that make up the leading index 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.

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