Bloomberg News

U.S. Leading Economic Indicators Rose 0.2% in September

October 20, 2011

(Updates with economist quote in fourth paragraph.)

Oct. 20 (Bloomberg) -- The index of U.S. leading economic indicators increased in September at a pace that suggests a slower rate of growth in the coming months.

The Conference Board’s gauge of the outlook for the next three to six months climbed 0.2 percent after a 0.3 percent gain in August, the New York-based research group said today. The September increase, the lowest since a decline in April, matched economists’ projections, according to the median forecast in a Bloomberg News survey.

A Federal Reserve survey published yesterday said the economy maintained its expansion last month even as more companies reported more doubt about the strength of the recovery. An acceleration in growth is needed to support the job gains that drive household spending, the biggest part of the U.S. economy.

“The momentum is less and less positive,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who accurately forecast the increase. “The problem we have is that we’re moving into an expansion phase at a pace that’s far below what an expansion usually is.”

The Standard & Poor’s 500 Index increased 0.5 percent to 1,215.83 at 10:13 a.m. in New York. The yield on the benchmark Treasury 10-year note rose to 2.20 percent from 2.16 percent late yesterday.

Labor Market

Another report today indicated the labor market has made little improvement since the start of the year. Applications for jobless benefits decreased by 6,000 to 403,000 in the week ended Oct. 15, according to the Labor Department in Washington. Economists forecast 400,000 claims, according to the median estimate in a Bloomberg survey.

Consumer confidence in the U.S. rose last week to the highest level in two months, the Bloomberg Consumer Comfort Index showed today. The gauge climbed to minus 48.4 in the period to Oct. 16 from minus 50.8 the prior week.

Estimates of the 55 economists surveyed by Bloomberg for the Conference Board’s leading economic index ranged from a drop of 0.1 percent to an increase of 0.5 percent.

“The LEI is pointing to soft economic conditions through the end of 2011,” Ken Goldstein, an economist at the Conference Board, said today in a statement. “The probability of a downturn starting over the next few months remains at about 50 percent.”

New Orders

Five of the 10 components of the leading index contributed to the increase in September. In addition to the interest-rate spread, they include consumer expectations and new orders for manufacturers.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, increased 0.1 percent from 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 rose 0.2 percent last month. The index measures business lending, length of employment, service prices and ratios of labor costs, inventories and consumer credit.

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 money supply adjusted for inflation.

U.S. Economy

The U.S. economy, the world’s largest, expanded at a 1.3 percent annual rate in the second quarter after growing at a 0.4 percent pace in the prior quarter, according to Commerce Department figures.

“There’s a lot of uncertainty and things to worry about in the world economy, and things like continued high unemployment in the U.S.,” Gregory Hayes, chief financial officer for United Technologies Corp., said yesterday in a conference call with analysts. At the same time, the Hartford, Connecticut-based company boosted its full-year earnings forecast after 11 percent profit growth in the third quarter.

Payrolls increased 103,000 in September, as the unemployment rate held at 9.1 percent, the Labor Department said Oct. 7. Gross domestic product will advance 1.7 percent this year and 2 percent in 2012, according to a Bloomberg survey of economists earlier this month.

“Overall economic activity continued to expand in September, although many districts described the pace of growth as ‘modest’ or ‘slight,’” the Fed said in its Beige Book survey released yesterday in Washington. “Contacts generally noted weaker or less certain outlooks for business conditions.”

Fed Chairman Ben S. Bernanke this month told a congressional committee that the two-year-old recovery is “close to faltering,” while repeating his forecast for a pickup in growth. Last month, the Fed announced a plan to spur the economy with lower borrowing costs by replacing $400 billion of short-term Treasury securities in its portfolio with longer- term bonds.

--Editor: Kevin Costelloe, Paul Badertscher

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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


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