Leading economic indicators decline in June
Thursday, July 22nd 2004, 11:09 am
By: News On 6
WASHINGTON (AP) _ A gauge of future economic activity fell last month for the first time in more than a year, signaling that the nation's financial recovery lost some steam.
The Conference Board said Thursday its Composite Index of Leading Economic Indicators dropped 0.2 percent in June to 116.2 following rises of 0.4 percent in May, 0.1 percent in April and 0.8 percent in March. Analysts had been expecting the index to remain flat in June.
The first decline since March 2003, the index's June slip was evidence of a rebound that had slowed rather than stalled, analysts said.
``I guess the concern is whether this could turn into a real significant slowdown in the economy,'' said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. But Sohn believes June was a short-lived ``soft patch'' and that, barring external shocks such as a terror attack or a sharp rise in energy prices, July's economic data will be stronger.
Ken Goldstein, economist for the Conference Board, said the data showed slowing momentum for the economy in June as the real estate market cooled off and retail and vehicle sales slowed.
``Strong economic performance in May gave way to a weaker June,'' Goldstein said. ``Although the leading index declined in June it is still about 3.4 percent higher in the second quarter than in the first.''
The index is closely watched because it is designed to predict the economy's path in the next three to six months.
Investors pushed down stocks after the report was released. In morning trading, the Dow Jones industrial average was off 74 points at 9,971 and the Nasdaq composite index traded down 15 points at 1,859.
Brian G. Belski, fundamental market strategist at US Bancorp Piper Jaffray, said it was really no surprise that the economy slowed somewhat in June, even if the trend was a little stronger than analysts had expected.
``We were looking for the economy to moderate a little bit. We had such a snapback type of recovery,'' Belski said.
Also on Thursday, the government reported that the number of Americans filing new claims for unemployment benefits fell slightly last week, indicating that the labor market is showing signs of improvement.
The Labor Department reported that 339,000 newly laid-off workers showed up at state unemployment offices for the week ending July 17, down by 11,000 from the previous week.
``It is no longer a jobless economic recovery,'' said Sohn, the Wells Fargo economist.
The Conference Board, which is based in New York, said that five of 10 indicators that make up the index increased in June. They were: consumer expectations, stock prices, a measure of unemployment insurance claims, manufacturers' new orders for nondefense capital goods and manufacturers' new orders for consumer goods and materials.
The negative contributors were building permits, manufacturing hours, vendor performance, real money supply and interest rate spread.
The index of coincident indicators, which tracks current economic performance, rose 0.1 percent in June after advancing 0.3 percent to 117.6 in May.
The index of lagging indicators was unchanged in June after rising 0.1 percent in May.