LEI Index Rises by Most in Nine Months

The Conference Board’s gauge for the next three to six months climbed 0.7% after a 0.4% advance in March that was larger than previously reported, the New York-based group said May 21. The median forecast of 45 economists surveyed by Bloomberg was for a 0.3% increase.

The reading suggests that the economy is set to pick up after a sluggish first quarter that was cursed by bad weather and a labor dispute at West Coast ports. While weakness in manufacturing probably will limit how fast the economy can grow, the highest level of homebuilding permits since June 2008 indicates housing will help pick up some of the slack.

“April’s sharp increase in the LEI seems to have helped stabilize its slowing trend, suggesting the paltry economic growth in the first quarter may be temporary,” Ataman Ozyildirim, an economist at the Conference Board, said in a statement. “The improvement in building permits helped to drive the index up this month, but gains in other components, in particular the financial indicators, have been somewhat more muted.”

Estimates in the Bloomberg survey ranged from increases of 0.1% to 0.7% after a previously reported March gain of 0.2%.

Seven of the 10 indicators in the Conference Board’s measure contributed to the April gain, led by building permits, fewer jobless claims and low interest rates.

The group’s index of coincident indicators, which tracks current economic activity, increased 0.2% in April after falling 0.1%. The gauge measures payrolls, incomes, sales and production.

The index of lagging indicators rose 0.1% in April.

News that the U.S. economy sputtered last quarter, combined with uneven employment gains, shook households’ confidence this month, raising concerns that spending will be slow to pick up. A strong dollar and weak oil prices also are impairing manufacturing activity, decreasing the odds of a quick rebound in the rate of expansion.

Other sectors are showing improvement. Housing starts unexpectedly surged more than 20% in April from a month earlier to the strongest pace since 2007. Building permits advanced 10% to a 1.14 million rate.

At the same time, it would take persistently sizable gains for housing to be the vital spark to growth and compensate for weakness in manufacturing as residential construction constitutes less than 4% of the economy.

The median forecast of economists surveyed by Bloomberg since the government’s last growth estimate indicates GDP shrank at a 0.9% annualized rate from January through March.

That would be the worst performance in a year, when bad winter weather again depressed growth. Revised Commerce Department figures are due May 29.