Rise in Leading Index Signals U.S. Expansion Into 2013
Friday, January 25, 2013
By Alex Kowalski -
Jan 24, 2013 4:26 PM ET
The index of U.S.
leading indicators rose in December by the most in three months, signaling
stronger housing and job markets will help the world’s largest economy make
more progress in the first half of 2013.
Board’s gauge of the outlook for the next three to six months increased 0.5
percent after no change in November, the New York-based group said today. Other
reports showed claims for jobless benefits unexpectedly dropped, manufacturing
picked up and consumer confidence waned.
The recovery in residential real estate, sustained job growth and
stock-market gains that are extending through this month are giving Americans
the wherewithal to spend.
The recovery in
residential real estate, sustained job growth and stock-market gains that are
extending through this month are giving Americans the wherewithal to spend.
residential real estate market driven by record-low interest rates will
probably reverberate through the economy this year, spurring sales of
appliances and furniture that underpin employment. The budget battles plaguing
Washington may prevent a more immediate pickup in growth.
"The recovery is
continuing, and it does look like it’s still on pretty good ground here,” said
Scott Brown, chief economist at Raymond James & Associates in St.
who correctly forecast the leading indicators index. "By the time we roll into
March, firms typically do step up their hiring, and the housing market really
starts to get going. Spring is really going to tell the tale on growth.”
Most stocks rose as
the economic data and better-than- forecast corporate earnings helped offset
the worst slump for Apple Inc. in four years. The Standard & Poor’s 500
Index was at 1,494.82 at the close in New York, almost unchanged from
unemployment insurance payments decreased by 5,000 to 330,000 in the week ended
Jan. 19, the fewest since the same week in 2008, the Labor Department reported
today in Washington.
Economists forecast 355,000 claims, according to the median estimate in a
The figures may
reflect challenges adjusting the data during the holiday period and at the
start of quarters. This year’s changes are following patterns seen in prior
years, a Labor Department spokesman said as the data were released. In 2008,
claims dropped for consecutive weeks in early January and then rebounded at the
end of the month.
"The swings are
attributable to the calendar,” said Brian Jones, senior U.S. economist at
Societe Generale in New York, who projected a drop to 328,000. He said the
numbers probably will rise at the end of the month. "We’re going to pay for
this,” he said.
The reports on the
leading index and jobless claims follow figures showing resilience in the
global economy. China’s
manufacturers expanded in January at the fastest pace in two years, while
euro-area services and factory output shrank less than economists projected.
composite index based on responses from purchasing managers in both
manufacturing and services rose to 48.2 from 47.2 in December, London-based
Markit Economics said today. Markit’s factory survey in China climbed to 51.9
In the U.S.,
gauge of manufacturing rose to 56.1 in January, the highest since March 2011,
from 54 a month earlier as orders and employment accelerated.
"We are seeing, in
our business, some degree of improvements in markets in the United States, in
the Middle East,” Richard Adkerson, president and chief executive officer at Freeport-McMoran
Copper & Gold Inc. (FCX), said on a Jan. 22 earnings call.
"China shows promise this year for renewed growth as they spend on
infrastructure and takes steps to improve its economy.”
projected the leading index would rise 0.4 percent last month, according to the
median estimate in a Bloomberg survey. Estimates from 48 economists ranged from
increases of 0.2 percent to 1 percent after a previously reported 0.2 percent
drop in November.
Five of the 10
indicators in the leading index contributed to the increase, helped by fewer jobless
claims and higher stock prices. The slump in unemployment applications in
December partly reflected the rebound in the economy after superstorm Sandy.
The leading gauge
was restrained in December by fewer orders
to factories and a drop in demand for business equipment.
"A pickup in
domestic growth is now more likely compared to a few months ago,” Ken
Goldstein, an economist at the Conference Board, said in a statement. "For growth
to gain more traction, we also need to see better performance on new orders and
an acceleration in capital spending.”
The leading index
for January may get another boost from a rally in equities after U.S. lawmakers
avoided broad-based tax increases and moved to temporarily suspend the federal
debt limit. The S&P 500 climbed almost 5 percent through yesterday.
The world’s largest
economy probably grew at a 1.2 percent annual pace in the last three months of
2012, economists surveyed by Bloomberg project a Commerce Department report
will show Jan. 30. Economists forecast that the resolution on taxes reached at
the start of 2013 will allow growth to proceed at a 2 percent rate for the
Congress still must
figure out how it will handle automatic spending cuts scheduled to begin March
1, an event that could further crimp economic growth.
In the meantime,
the housing market may support the expansion while the lawmakers debate the
budget. Building permits, a proxy for future construction, increased
in December to the highest level since June 2008, showing lower prices, a lack
of supply and record-low mortgage rates are encouraging new projects.
The labor market
also looks stable. Payrolls expanded by 1.84 million in 2012, matching the
gains may help underpin sentiment. Consumer confidence
fell last week to its lowest level in more than three months as concern about
the U.S. economy mounted.
Consumer Comfort Index declined to minus 36.4 in the seven days ended Jan. 20,
the weakest since early October, from minus 35.5 the prior period. The measure
has fallen for three straight weeks, the longest slump since August.
The setback in
sentiment corresponds to the two percentage- point increase in the payroll tax
that took effect at the start of 2013, indicating the resulting drop in
take-home pay has shaken Americans.
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