Economy: U.S. Leading Indicators Beat Forecast in October

World's Largest Economy Will Keep Growing in Early 2012

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The index of U.S. leading indicators climbed more than forecast in October, signaling the world's largest economy will keep growing in early 2012.

The Conference Board's gauge of the outlook for the next three to six months rose 0.9%, the biggest jump since February, after a 0.1% September increase, the New York- based research group said today. The median forecast of 56 economists surveyed by Bloomberg News projected the gauge would advance 0.6%.

Gains in consumer spending, manufacturing and homebuilding, combined with fewer job losses, point to an economy that is weathering the turbulence in financial markets caused by the debt crisis in Europe. Nonetheless, a 9% jobless rate and political gridlock over deficit-cutting have hurt confidence, which may be a hurdle to a further pickup in the pace of growth.

"Economic conditions are improving," Robert Dye, chief economist at Comerica Inc. in Dallas. "All eyes remain on Europe and that remains the great unknown and, to a lesser extent, what is going on in Washington with the supercommittee on the deficit."

The index "is pointing to continued growth this winter, possibly even gaining a little momentum by spring," Ken Goldstein, an economist at the Conference Board, said today in a statement. "The lack of confidence has been the biggest obstacle in generating forward momentum."

Nine of the 10 components of the leading index contributed to the increase in October, led by a jump in building permits, the spread between short- and long-term interest rates, a longer factory workweek and a drop in claims for jobless benefits.

A surge in stock prices also contributed to the increase in the gauge last month, reversing September's plunge.

An improvement in household sentiment has already given the leading index a boost this month. The University of Michigan index of consumer expectations for six months from now climbed to 56.2 in November, a five-month high, from 51.8 in October. Nonetheless, the measure remains below the 80.5 average of the previous expansion that ended in December 2007.

The U.S. economy, the world's largest, expanded at a 2.5% annual rate in the third quarter after growing at a 1.3% pace in the prior three months, according to Commerce Department figures.

Data in recent weeks have been better than forecast, suggesting the economy is picking up even more this quarter. Retail sales in October rose 0.5%, helped by the biggest jump in electronics purchases in two years, while industrial production increased 0.7%, reports showed this week. Building permits, a sign of future construction, rose 11 percent while housing starts fell a less-than-forecast 0.3%, a Commerce Department report showed.

The job market is one area yet to see much improvement. Payrolls increased 80,000 in October, the smallest advance in four months, the Labor Department said Nov. 4. The unemployment rate fell to 9 percent from 9.1 percent in September. It's hovered around 9 percent or more since April 2009.

~~~Bloomberg News~~~

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