WASHINGTON -- A gauge designed to predict the economy's future health increased in June for a fifth consecutive month, supporting the view that economic growth should accelerate in the second half of this year.
The Conference Board said Friday that its index of leading indicators rose 0.3 percent last month. That was slightly lower than forecast, but the May increase was revised up to a 0.7 percent gain, a bit stronger than first estimated.
"The economy continues to keep going better, and companies continue to do better," John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, N.C., said before the report. "It's going to be increasingly positive."
The economy shrank sharply in the first three months of the year, reflecting the effects of a harsh winter, but economists say a rebound began in the April-June quarter and will strengthen in the second half of this year.
Conference Board economist Ken Goldstein said that stronger consumer demand driven by sustained job gains remained "the main source of improvement for the U.S. economy."
The unemployment rate fell to a nearly six-year low of 6.1 percent in June as employers added 288,000 new jobs, marking the fifth straight monthly gain above 200,000. That is the best stretch of job growth since the tech boom of the late 1990s.
The leading economic index is composed of 10 indicators. For June, six of the 10 indicators showed gains with the positive contributions including interest rates, credit availability and stock prices. The biggest drag on the index was a drop in applications for permits to build new homes and apartments.
Conference Board analysts said that the weakness in housing represented some risk to the outlook for stronger growth, but they predict ted this would be offset by continued favorable conditions in the labor market.
Many economists believe that the economy, after shrinking at an annual rate of 2.9 percent in the January-March quarter, rebounded to growth close to 3 percent in the April-June quarter and will strengthen further in the second half of 2014.
"The pace of economic activity continued to expand moderately," Ken Goldstein, economist at the Conference Board, said in a statement. "Stronger consumer demand driven by sustained job gains and improving confidence remains the main source of improvement for the U.S. economy."
A measure of consumer confidence in the United States released Friday declined in July to a four-month low as Americans' outlook for the economy dimmed.
The Thomson Reuters/University of Michigan preliminary index of sentiment dropped to 81.3 this month from 82.5 in June. The median projection in a Bloomberg survey of 68 economists called for a July reading of 83.
Higher prices at grocery store checkout lines are souring attitudes and straining household budgets as they take a bigger bite out of workers' paychecks. Absent a pickup in wage growth, a higher cost of living increases the risk that consumer spending, which accounts for almost 70 percent of the economy, will cool.
"Consumers are having a little bit of trouble seeing further improvement later down the road," said Gennadiy Goldberg, a U.S. strategist at TD Securities USA LLC in New York. "If you started to have wages pick up, you would probably have more improvement in buying expectations for things like homes and autos and durable goods."
Information for this article was contributed by Martin Crutsinger of The Associated Press and by Jeanna Smialek and Nina Glinski of Bloomberg News.
Business on 07/19/2014