Rising index signals U.S. growth

A monthly index forecasting economic performance in the United States has advanced on growing strength in the housing and labor markets, signalling continued growth in the months ahead.

Separate measures of current and past economic performance also edged up.

Cuts in federal spending and continued uncertainty for businesses and consumers could affect the outlook, however.

The Conference Board reported its Leading Economic Index (LEI), climbed six-tenths of a percent to 95 in April. The index has increased eight-tenths of a percent the past three months and 1.7 percent over the past six months.

Ataman Ozyildirim, an economist with the Conference Board, attributed the gain to improvement in the housing and labor markets. “In general, the LEI points to a continuing economic expansion with some upside potential,”he added.

Ken Goldstein, another economist with the business research and membership group, said the biggest risk to that expansion could be the adverse effects of automatic federal spending cuts implemented under sequestration.

“The biggest positive factor is the potential for improvement in the recovering housing and labor markets,” Goldstein added. “The biggest unknown is the resiliency in confidence, both consumer and business.”

For April, seven of 10 indicators of the LEI advanced: building permits, interest rate spread, a leading credit index, new orders for both capital and consumer goods and stock prices. Moreover, average weekly initial claims for unemployment benefits declined. Retreating indicators included average weekly manufacturing hours, consumer expectations and a new orders index.

The Coincident Economic Index (CEI), a measure of current economic performance, edged up a tenth of a percent in April to 105.6. The CEI has increased 1.3 percent over the past six months.

For April, three indicators of the CEI advanced: nonfarm payrolls, personal income and sales. Industrial production retreated.

The Lagging Economic Index (LAG), a measure of past performance, also edged up a tenth of a percent in April to 118.4. The LAG has increased three-tenths of a percent over the past three months.

For April, two indicators of the LAG advanced, three retreated and two held steady. The advancing indicators were labor costs and a decrease in the average duration of unemployment. Retreating indicators were commercial and industrial financing, the cost of services and consumer credit. Inventory levels and the average prime interest rate charged by banks remained unchanged