Economic Indicators Send Mixed Signals

NEW YORK CITY and WASHINGTON, DC-There was positive and not-so-positive news in national economic reports Wednesday. On the positive side, economic indicators have now increased for four consecutive months, even if modestly, the Conference Board said Wednesday.

The board's Leading Economic Index (LEI) for the US increased 0.2% in October to 97.5, following a 0.9% increase in September and a 0.7% gain the month prior, although it was offset by a continuing decline in consumer confidence, dropping from 72.4 in October to 70.4 in November, the firm said separately.

Kathy Bostjancic, director of macroeconomic analysis at the board, says the uptick in the LEI “supports our forecast that the US economy is poised to grow somewhat faster at 2.3% in 2014 compared to 1.6% in 2013. Within the details, the sub-indexes contributing positively to growth are the financial, housing and manufacturing variables.” Putting the brakes on growth, however, is what Bostjancic terms “the ongoing caution of businesses that continue to keep tight reins on capital expenditures.”

“The US LEI has increased for four consecutive months,” says Ken Goldstein, economist for the Conference Board. “Overall, the data reflect strengthening conditions in the underlying economy. However, headwinds still persist from the labor market, accompanied by business caution and concern about federal budget battles. The biggest challenge to date has been relatively weak consumer demand, which continues to be restrained by weak wage growth and slumping confidence.”

Offsetting the still-tepid job growth to a degree, the US Department of Commerce on Wednesday said that initial claims for state unemployment benefits the previous week declined 10,000 to a seasonally adjusted 316,000. It marked the second consecutive week of declines in jobless claims; Reuters reported that economists had expected claims to rise instead to 330,000.

In a separate report, and in line with the Conference Board's caveat about business caution, the Commerce Department showed that non-defense capital goods orders excluding aircraft fell 1.2% in October. The previous month, capital goods orders had also declined, ticking downward by 1.4% in September.

Accordingly, economists trimmed their sails in GDP growth forecasts. Economists at Morgan Stanley cut their fourth-quarter GDP growth estimate by two-tenths of a percentage point to 1.2%, while Barclays lowered its Q4 growth forecast to 1.7% from 1.8%, Reuters reported.