March leading index fails to cheer

Measures to boost economy may not immediately pay off

(NEW YORK) The index of US leading economic indicators in March fell more than forecast, indicating any recovery from what may be the longest recession in the postwar era is still many months away.

The Conference Board's gauge fell 0.3 per cent after a 0.2 per cent drop in February that was smaller than previously estimated, the New York-based research group said yesterday. The index points to the direction of the economy over the next three to six months.

Rising unemployment and tight credit mean recent gains in consumer spending, the biggest part of the economy, will probably not be sustained, extending the contraction well into the second half of the year.

The report cautions that Federal Reserve and Obama administration measures to boost the financial system may not immediately pay off.

'There is just no pickup in general economic conditions despite all the gas being given it from monetary and economic stimulus,' Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd here, said before the report.

The index was forecast to decline 0.2 per cent, according to the median of 51 economists in a Bloomberg News survey, after an originally reported decrease of 0.4 per cent the prior month. Estimates ranged from a drop of 0.7 per cent to a 0.1 per cent gain.

Six of the 10 indicators in yesterday's report subtracted from the index, led by a plunge in building permits and declining stock prices.

Faster vendor performance - signalling a decrease in order backlogs - a decline in factory hours, rising jobless claims and a drop in bookings for capital goods also contributed to the drop.

Two of the gauges show signs of improving this month. The number of applications for jobless benefits two weeks ago fell to the lowest level since January and stocks have rallied 29 per cent since reaching a 12-year low on March 9.

Three of the leading components improved last month, led by an increase in the supply of money.
Other positives were a gain in the University of Michigan consumer expectations gauge and a widening spread between the 10- year Treasury and the overnight fed funds rate. Orders for consumer goods were little changed. -- Bloomberg

Source: Business Times, 21 April 2009