The U.S. economy should expand modestly in coming months, a gauge of future business activity showed Thursday (June 21), indicating consumers and businesses may be shrugging off the weak housing market.
According to an Associated Press report, the Conference Board said its index of leading economic indicators rose 0.3%, higher than the 0.2% analysts were expecting. The increase reversed a revised 0.3% drop in April, down from the original 0.5% decline that economists blamed on soaring gas prices and a drop in building permits.
The reading is designed to forecast economic activity over the next three to six months and tracks 10 economic indicators. The advancing contributors, starting with the largest, were weekly unemployment insurance claims, stock prices, building permits, consumer expectations and vendor performance.
The negative contributors, beginning with the largest, were real money supply, average weekly manufacturing hours and interest rate spread.
With the latest reading, the cumulative change in the index over the past six months has gone up 0.3%.
The report shows that the impact of the housing slump has been fairly contained so far, said Patrick Newport, an economist with Global Insight.
“It just hasn’t spilled over to the rest of the economy,” he said.
Analysts don’t expect the housing industry to rebound until early next year.
While the overall U.S. economy grew at a lackluster 0.6% in the first three months of this year, many analysts believe the pace has picked up significantly in the spring.