Leading indicators in U.S. shows expansion will strengthen

WASHINGTON – The index of U.S. leading indicators increased in March by the most in four months, a sign the economic expansion will strengthen following harsh winter weather.

The Conference Board’s index, a gauge of the outlook for the next three to six months, rose 0.8 percent after a 0.5 percent gain in February, the New York-based group said on Monday. The median forecast of 42 economists surveyed by Bloomberg called for an advance of 0.7 percent.

Continued gains in the labor market, improving consumer sentiment and strengthening demand are boosting consumption among households, who have spent the last five years cleaning up their balance sheets. Looking ahead, Americans will need bigger wage gains to extend a recent pickup in spending, which accounts for 70 percent of the economy.

“The economy is picking up momentum after a slow start and a weak first quarter,” Stuart Hoffman, chief economist at PNC Financial Services Group Inc., said in an interview before the report. “There’s definitely more going up than down.”

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Estimates in the Bloomberg survey ranged from gains of 0.3 percent to 1 percent.

Stocks held earlier gains after the report. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,867.91 at 10:27 a.m. in New York.

Broad gain

Six of the 10 indicators in the leading index contributed to the increase last month, led by the spread between short- and long-term interest rates, a drop in jobless claims and an increase in the length of the factory workweek.

“The economy is rebounding from widespread inclement weather and the strengthening in the labor market is beginning to have a positive impact on growth,” Ken Goldstein, an economist at the Conference Board, said in a statement on Monday. “Overall, this is an optimistic report, but the focus will continue to be on whether improvements in the labor market can be sustained, fueling stronger economic performance over the next few months.”

The Conference Board’s index of coincident indicators, a gauge of current economic activity, increased 0.2 percent in March after a 0.4 percent gain 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.

Lagging index

The gauge of lagging indicators rose 0.6 percent in March after a 0.3 percent advance the previous month.

The labor market has shown signs of shaking off its winter slump, with employers adding 192,000 workers to payrolls last month after a revised 197,000 gain in February that was larger than initially estimated, according to Labor Department data.

A separate report last week showed initial jobless claims are hovering near the lowest level in almost seven years, increasing by 2,000 to 304,000 in the week ended April 12. The total number of people receiving benefits fell by 11,000 to 2.74 million in the week ended April 5, the fewest since December 2007, the Labor Department’s report showed.

Momentum may be fading in other parts of the economy. The housing market recovery has been challenged by higher interest rates, slow wage growth and tight credit, which have put homeownership out of reach for some would-be buyers.

Fewer permits

Housing starts climbed 2.8 percent to a less-than-forecast 946,000 annualized rate following February’s 920,000 pace, a Commerce Department report showed last week. Building permits, which are part of the leading index, declined 2.4 percent to a 990,000 annualized pace.

Gains in the stock market – which had boosted the wealth of some households amid Federal Reserve stimulus – have also been harder to come by this year. The Standard & Poor’s 500 Index climbed 0.7 percent in March and is down 0.4 percent this month through April 17.

Growth in the U.S. is projected to reach 2.7 percent this year compared with 1.9 percent in 2013, according to a Bloomberg survey of economists, supporting the Fed’s outlook that the economy has improved enough to continue unwinding its bond-buying program.

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