Thursday May 21, 07:11 PM
Key US economic index up first time in 7 months
By P. Parameswaran
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WASHINGTON (AFP) - A key US economic index rose in April for the first time in seven months, suggesting the world's biggest economy is poised for modest growth later this year, the Conference Board said Thursday.
The index of leading economic indicators -- forecasting conditions in the next three to six months -- increased 1.0 percent in April, following a 0.2 percent decline in March and a 0.5 percent decline in February.
Most analysts had expected a 0.8 percent increase.
"The leading indicators suggest that while the recession will continue in the near term, the declines will be less intense," said Ken Goldstein, an economist at The Conference Board, a business research firm.
"The question is how long before declines in activity give way to small increases. If the indicators continue on the current track, that point might be reached in the second half of the year," he said.
The positive contributors to the index -- beginning with the largest -- were stock prices, interest rate spreads, consumer expectations, initial claims for unemployment insurance, manufacturing hours, supplier deliveries and manufacturers' new orders.
The one percent rise in the index in April is the biggest gain since November 2005, said Ian Shepherdson, chief US economist with High Frequency Economics.
"We expect another sharp increase in the index for May," he said.
"Even if it is then flat in June it will be up at a near-six percent rate in the second quarter, the best performance since the second quarter of 2004 and consistent with our view that the economy will record at least some very modest growth in the summer quarter," Shepherdson said.
US authorities expect the economy to bottom out and grow later this year, with Federal Reserve policymakers banking on a modest growth in the second half of 2009.
The central bank revised its economic outlook Wednesday to show a drop in US output to a range of between 1.3 and 2.0 percent over 2009, but said some of the worst declines may be over.
US economic output contracted a massive 6.1 percent in the first quarter of 2009 after a 6.3 percent slide in the previous quarter.
Aaron Smith, a senior economist for Moody's Economy.com, said although the Conference Board's key index may have bottomed, the lead time before economic growth resumed could be long.
"Based on cycles since 1960, the average lead time between the trough in the leading index and the official trough in activity ... has been six months, with a range of from two to 11 months," he said.
Among key economic concerns the administration of President Barack Obama is grappling with is unemployment as firms slash payrolls to tide over the prolonged economic contractions.
Fresh data from the Labor Department on Thursday showed new jobless claims by American workers fell in the past week but the number of workers collecting benefits for more than a week jumped to a record 6.6 million.
The seasonally adjusted initial claims in the week to May 16 dropped by 12,000 to 631,000 from the previous week's revised figure of 643,000. Analysts had expected the figure to be around 625,000.
But the number collecting jobless benefits jumped to 6,662,000, an increase of 75,000 from the preceding week.
"The trend in continuing claims is worrisome on a number of levels, but the most important factor in terms of the economy is that it continues to be an impediment for a pickup in consumer spending and a recovery in the housing market," said Patrick O'Hare of Briefing.com.
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