Economic Index Falls in March
An indicator of future U.S. economic activity slipped for a second month in March, hinting at slower growth ahead, and separate data showed factory activity in the mid-Atlantic region edged up in April despite higher costs.
A third economic report Thursday pointed to continued strength in the labor market.
The reports support many analysts’ expectations that the torrid pace of first-quarter growth will cool to more sustainable levels, although tight labor markets will keep the Federal Reserve on watch for potential inflation pressures.
“We are seeing a bit of a softening in forward momentum,” said Kathleen Stephansen, director of global economics at Credit Suisse. “This gives the Fed justification to say, ‘Let’s take a pause here after May,’ ” she said, referring to the central bank’s next policy meeting.
The Fed has been raising interest rates for nearly two years in a campaign that many analysts believe is nearing its end.
The Conference Board said its index of leading economic indicators, which is aimed at forecasting economic activity, fell 0.1% last month after a downwardly revised 0.5% decrease in February.
“With the price of a barrel of oil rising above $70 and with interest rates slowly increasing, the global economy isn’t likely to be picking up steam soon,” said Conference Board labor economist Ken Goldstein.
Economists surveyed by Reuters had expected the March index to be unchanged.
“The leading indicators have been much more volatile since Hurricane Katrina. However, the trend has been generally flat over the past six months, at levels that are well below where they were 12 to 18 months ago,” said Steven Wood, chief economist at Insight Economics. “This suggests that economic growth in the year ahead should be weaker than in the past year. But it doesn’t suggest that growth will be extremely sluggish or will turn negative.”
Separately, the Philadelphia Federal Reserve Bank said its business activity index edged up to 13.2 in April from 12.3 in March, a touch below Wall Street estimates of 14, while surging commodities prices pushed inflation readings higher.
New factory orders dropped sharply in April, as did inventories, suggesting that manufacturers will need to rebuild stocks in coming months.
In another report, government data showed that first-time claims for state unemployment benefits fell by 10,000 to 303,000 in the week ended Saturday, slightly more than expected.
Weekly jobless claims have been hovering around the 300,000 mark since early this year, a level that economists generally consider to be noninflationary while still pointing to good job growth.
