U.S. Economic Growth Seen Slowing

Published 12:00 am Monday, December 26, 2005

NEW YORK – U.S. economic growth is likely to slow in coming months as the ongoing slump in the housing industry takes a deeper toll on businesses and consumers, a gauge of future business activity showed Thursday.

The Conference Board said its index of leading economic indicators fell 0.3 percent in June, more than the 0.1 percent drop analysts were expecting. The index had risen 0.2 percent in May after dropping 0.2 percent in April.

“The leading index has slowed in recent months, suggesting a possible softening of the overall pace of economic activity later in the second half of this year,” the Conference Board’s labor economist, Ken Goldstein, said in a statement accompanying the report.

Email newsletter signup

Wall Street, meanwhile, focused on upbeat earnings reports. The Dow rose 78.61, or 0.56 percent, to 13,996.83.

Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 0.43 percent to 1,552.80, while the Nasdaq composite index rose 0.68 percent to 2,717.73.

The Conference Board report, designed to forecast economic activity over the next three to six months, tracks 10 economic indicators.

The five negative contributors were building permits, unemployment claims, consumer expectations, vendor performance and interest rate spread.

The positive contributors were weekly manufacturing hours, new orders for non-defense capital goods and stock prices. Manufacturers’ orders for consumer goods and materials and real money supply held steady in June.

While the report captures the weakness in the housing market, it fails to reflect the economy’s bright spots, said Brian Bethune, an economist with Global Insight.

“It’s not picking up the strength of the global economy, the momentum of corporate profits driven by overseas sales and employment conditions,” Bethune said.

That should offset some of the weakness in the housing sector, he said.

Also Thursday, the Labor Department reported that jobless claims dropped last week to the lowest level in two months.

The job market has held steady despite a yearlong economic slowdown that pushed overall growth to an anemic 0.7 percent in the first quarter, the poorest showing in more than four years.

Federal Reserve Chairman Ben Bernanke, in a second day of testimony before Congress on Thursday, repeated the Fed’s belief that the economy will grow gradually this year, restrained by the housing slump.

The index of leading economic indicators has bounced up and down over the past few months, with offsetting increases and decreases suggesting that economic growth is likely to continue, but likely at a slower pace in the near term.

With the latest report, the cumulative change in the index over the past six months has dropped 0.7 percent, the Conference Board said.

On the Net:


A service of the Associated Press(AP)