Leading economic indicators in U.S. climbed 0.2% in October

America has a real Thanksgiving

The index of U.S. leading indicators rose for a fourth straight month in October, reflecting gains in factory orders and applications to begin new-home construction. The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.2% last month after a 0.9% jump in September that was more the previously reported, the New York-based group said today. The median forecast of economists surveyed by Bloomberg called for no change.

The gauge was depressed by a temporary surge in jobless claims linked to changes in California’s computer reporting system and the federal government’s 16-day shutdown, which caused consumer sentiment to falter. At the same time, rising stock prices, higher home values and easier access to credit are giving Americans the wherewithal to boost spending.

“Employment growth and factory activity are both looking like they’re on track to support the economy,” Kenneth Kim, an economist at Stone & McCarthy Research Associates in Skillman, New Jersey, said before the report. “We’re still growing moderately, we’re not growing great.”  Estimates of 43 economists in the Bloomberg survey ranged from a decline of 0.4% to a 0.3% gain after a previously reported 0.7% increase in September.

Other figures today showed fewer Americans than expected filed jobless claims last week and orders for big-ticket items declined in October.

Jobless claims

Applications for unemployment benefits decreased by 10,000 to 316,000 in the week ended Nov. 23, the fewest in two months, the Labor Department said in Washington. The median forecast in a Bloomberg survey called for an increase to 330,000 claims.

Bookings for goods meant to last at least three years fell 2% last month after a 4.1% gain in September, Commerce Department data showed. Excluding transportation equipment, where demand is often volatile month to month, orders dropped 0.1% after a 0.2% gain.      Seven of the 10 indicators in the Conference Board’s leading index contributed to the change, helped by a jump in building permits. The gauge was also boosted by easier credit conditions, higher stock prices, an increase in orders placed with manufacturers, and low borrowing costs.      “The recent increase in the index supports our forecast that the U.S. economy is poised to grow somewhat faster at 2.3% in 2014, compared to 1.6% in 2013,” Conference Board economist Kathy Bostjancic said in a statement. “Restraining growth is the ongoing caution of businesses that continue to keep tight reins on capital expenditures.”

The number of people filing initial jobless claims increased last month as California worked through a backlog of claims that built up when the state reconfigured its computer system used to process applications.

Coincident indicators

     The gauge of coincident indicators, which tracks current economic activity, increased 0.2% in October following a 0.3% advance the previous month.      The coincident index covers payrolls, incomes, sales and production, measures used by the National Bureau of Economic Research to determine when U.S. recessions start and end.      Higher share prices have combined with rising home prices to boost household wealth. Home prices in 20 U.S. cities rose by the most since February 2006 in the 12 months through September, an S&P/Case-Shiller index of property values showed yesterday.      At the same time, the budget impasse in Congress weighed on consumer attitudes. Confidence fell in October to a 10-month low, according to the Thomson Reuters/University of Michigan’s final index. The group’s barometer of expectations six months from now was the weakest in almost two years. The gauge rebounded in November.

Fiscal debate

Businesses including Target Corp., the nation’s second- largest discount retailer, said the budget standoff on Capitol Hill weighed on sentiment.

“A very high percentage of our guests were aware of the government shutdown and concerned it would hurt the economy,” Kathryn Tesija, Target’s executive vice president of merchandising, said in a Nov. 21 conference call. “In addition, a meaningful portion indicated they were changing their shopping behavior, in light of their current financial situation. This was evident in our guest metrics.”  The Conference Board’s gauge of lagging indicators increased 0.3% in October after a 0.5% rise in September.


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