The index of US leading economic indicators climbed more than forecast in July, a sign of sustained expansion in the world’s largest economy.
The Conference Board’s gauge of the outlook for the next three to six months increased 0.4 per cent after a revised 0.4 per cent drop in June, the New York-based group said on Friday. Economists projected the gauge would rise by 0.2 per cent, according to the median estimate in a Bloomberg survey.
Retail sales rose more than forecast last month, showing households are looking beyond the slowdown and increasing consumer spending, which accounts for about 70 per cent of the economy. The housing market also has signalled improvement. At the same time, unemployment remains above 8 per cent, which is consistent with the Federal Reserve’s view that economic growth will “remain moderate over coming quarters.”
“What we’ve seen so far is a decent batch of July numbers, not necessarily convincing to the point that we’re going to see a sharp turnaround in the economy, but it is putting at bay concerns that we’re heading for another recession,” Sean Incremona, senior economist at 4Cast Inc. in New York, said before the report. “Housing is improving — that’s helping the bottom line. But it’s still a very slow recovery.”
Estimates from 46 economists in the Bloomberg survey ranged from no change to an increase of 0.6 per cent in the Conference Board’s leading index.
Seven of the 10 indicators in the index contributed to the increase, led by building permits and state jobless claims, while two indicators decreased. One, the average workweek, was unchanged in July.
The Conference Board’s index of coincident indicators, a gauge of current economic activity, increased 0.3 per cent after rising 0.2 per cent in June.
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 US recessions.
The gauge of lagging indicators rose 0.4 per cent in July after increasing a revised 0.1 per cent the previous month.
Federal Reserve officials continue to monitor signs of cooling in the US economy as joblessness has remained above 8 per cent since February 2009 — the longest stretch in the post-World War II era. Unemployment and the looming “fiscal cliff” — when higher taxes and spending cuts are triggered at year-end unless Congress acts — could hold back further gains in consumer spending.
Cisco, Google job cuts
Cisco Systems Inc. and Google Inc. are among companies announcing job cuts. Cisco, the biggest maker of computer-networking equipment, said on July 23 that it plans to eliminate about 1,300 jobs, or 2 per cent of the workforce, as Europe’s debt crisis and sluggish corporate spending threaten sales.
Mountain View, California-based Google will cut about 4,000 jobs at its Motorola Mobility Holdings Inc. unit, or 20 per cent of the staff at the company it bought for about $12.5 billion, according to an August 13 regulatory filing. About one-third of the reductions will be in the US workforce.
The economy expanded at a 1.5 per cent annual rate from April through June, after a 2 per cent pace in the prior three months, Commerce Department data show.
The home building market remains a bright spot for the recovery. Confidence among US home builders increased in August to the highest level in more than five years. The National Association of Home Builders/Wells Fargo confidence index climbed to 37, its best showing since February 2007, a report from the Washington-based group showed on Wednesday.
American builders took out more residential construction permits in July than at any time in the past four years, a sign the market will continue to improve.
Applications, a proxy for future work, rose to an 812,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg and the most since August 2008, Commerce Department figures showed in Washington on Thursday. Housing starts fell 1.1 per cent to a 746,000 rate from June’s 754,000, which was the strongest pace in more than three years.