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Leading Indicators Point to Sustained Expansion in U.S.

Index of Leading Economic Indicators in U.S. Climbs 0.4%
A job seeker goes over handouts with a recruiter during the Minneapolis Career Fair in Bloomington, Minnesota. Photographer: Ariana Lindquist/Bloomberg

The index of U.S. leading indicators rose in January and the cost of living climbed less than forecast, pointing to sustained economic growth with limited price pressures.

The 0.4 percent increase in the Conference Board’s gauge of the outlook for the next three to six months followed a 0.5 percent rise in December, the strongest back-to-back gains in almost a year. The consumer-price index rose 0.2 percent in January after no change, the Labor Department said today.

An improvement in the labor market and increased hours worked may help deliver the income gains needed to encourage Americans to boost spending. A lack of inflation gives Federal Reserve policy makers room to keep interest rates low through 2014 to ensure the expansion endures a global slowdown.

“There is some pretty good momentum in the economy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Inflation seems to be in a sweet spot -- not too hot, not too cold.”

Stocks advanced, sending the Standard & Poor’s 500 Index near the highest level in about three years, amid optimism Greece will get a bailout. The S&P 500 increased 0.2 percent to 1,361.23 at the close in New York. The yield on the benchmark 10-year Treasury note climbed to 2 percent from 1.98 percent late yesterday.

In Europe today, a report showed U.K. retail sales unexpectedly rose for a second month in January, adding to signs the economy may strengthen and avoid a recession. Purchases including fuel rose 0.9 percent from December, when they rose 0.6 percent, according to figures from the Office for National Statistics in London.

Europe’s Debt Crisis

Elsewhere, Singapore’s exports fell in January for the first time in three months as Europe’s debt crisis crimped demand for electronics and petrochemicals and the Chinese New Year holiday shortened the working month.

The median forecast of 48 economists surveyed for the January leading index called for an increase of 0.5 percent, with estimates in the Bloomberg survey ranging from 0.4 percent to 1.4 percent.

Seven of the 10 indicators in the leading index contributed to the pickup, helped by a gain in the factory workweek and higher stock prices.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.2 percent after a 0.3 percent increase in the prior month.

Companies seeing a pickup in demand include Swift Transportation Co., the biggest truckload carrier in North America.

Swift Transportation

“Our customers are all doing very, very well,” Jerry Moyes, chief executive officer at Swift Transportation, said in a Feb. 16 conference presentation. “They’re very bullish about going forward. They’re talking about adding new stores, adding new distribution centers and a lot of them have got quite a bit of cash.”

Consumers’ moods also are lifting. The Bloomberg Consumer Comfort Index rose for a fourth straight week to reach the highest level in a year as more households said they believe the economy is improving, according to data for the period ended Feb. 12.

Claims for jobless benefits last week dropped to the lowest level since 2008, showing the job market is on the mend. Builders began work on more houses in January, and manufacturing in the Philadelphia area accelerated, other reports showed this week.

Federal Reserve

“Despite some recent signs of improvement, the recovery has been frustratingly slow,” Fed Chairman Ben S. Bernanke said yesterday. He also said bank supervisors must strike a “delicate balance” between encouraging lending and avoiding a race to the bottom in loan standards.

Central bank officials have said they plan to keep the benchmark interest rate low until at least late 2014 to spur economic growth.

Limited inflation is affording policy makers the room to keep a lid on borrowing costs. The consumer-price index rose 2.9 percent from January 2011, the smallest year-to-year advance since March 2011.

The so-called core measure of consumer prices, which excludes food and energy costs, also rose 0.2 percent in January from the previous month. The core measure increased 2.3 percent in the 12 months ended in January, the biggest gain since September 2008.

Fed policy makers see inflation decelerating this year to below their 2 percent goal, with most expecting prices to rise 1.4 percent to 1.8 percent, according to forecasts released Jan. 25.

“Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable,” the Fed said Jan. 25. The monetary policy-making committee “also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the committee’s dual mandate” of fostering price stability and maximum employment.

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