An index of U.S. leading indicators rose in July by the most in four months, as stronger job growth helps power the world’s largest economy.
The Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, climbed 0.9 percent after a 0.6 percent gain in June, the New York-based group said today. The median forecast of 49 economists surveyed by Bloomberg called for a 0.6 percent advance.
More jobs are underpinning sentiment and demand among U.S. households. Going forward, further gains in wages and improvement in the housing market will be needed to boost consumer spending and add additional momentum to the economic recovery, now in its sixth year of expansion.
“There’s no real indication that the economy is going to turn south here anytime soon,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. Brown correctly projected the July figure. The gain in the LEI is “all very positive and consistent with the broad range of economic figures we’ve been seeing. We’re still definitely on the recovery path.”
Estimates from 49 economists in the Bloomberg survey ranged from gains of 0.3 percent to 1.1 percent.
Seven of the 10 indicators in the leading index contributed to the increase last month, led by declining jobless claims and more building permits.
The Conference Board’s index of coincident indicators, a gauge of current economic activity, increased 0.2 percent in July after a 0.3 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. The gauge of lagging indicators also rose 0.2 percent in July.
“The economy is gaining traction and growth should continue at a strong pace for the remainder of the year,” Ataman Ozyildirim, an economist at the Conference Board, said in a statement today.
The labor market has shown signs of strength this year, with employers adding more than 200,000 jobs for the last six months -- the first time that’s happened since 1997. Payrolls grew by 209,000 last month, while the unemployment rate rose to 6.1 percent as more people entered the labor force.
A report earlier today showed jobless claims are hovering near historical lows, decreasing by 14,000 to 298,000 in the week ended Aug. 16.
Residential real estate may be regaining some stability after a lull earlier this year. A report today from the National Association of Realtors showed purchases of previously owned homes unexpectedly rose in July to a 10-month high.
Housing starts climbed 15.7 percent to a 1.09 million annualized rate, the highest in eight months, following June’s 945,000 pace, figures from the Commerce Department showed this week. Permits for future projects advanced 8.1 percent to a 1.05 million pace, reflecting the fastest rate of building applications for single-family dwellings since November.
Other elements of the economy remain challenged. Gains in wages since 2009 have barely kept up with a similarly tepid pace of inflation, raising the real value of compensation per hour by only 0.5 percent. That marks the weakest growth since World War II, with increases averaging 9.2 percent at a similar point in past expansions, according to Bureau of Labor Statistics data compiled by Bloomberg.
Growth in the U.S. is projected to reach 2 percent this year, according to a Bloomberg survey of economists, supporting the Fed’s outlook that the economy will continue to require accommodative monetary policy even after the central bank winds down its unprecedented bond-buying program, which is on pace to end in October.