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September 22, 2009

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Economic activity in US up for 5th month

A PRIVATE forecast of American economic activity rose in August for the fifth straight month, the latest sign the recession has ended.

The Conference Board said yesterday its index of leading indicators rose 0.6 percent in August. That follows a 0.9 percent gain in July revised up from 0.6 percent.

The indicators are designed to project economic activity in the next three to six months. The August results support many analysts' projections that the economy started growing again in the current July-September quarter and will continue to gain in the fourth quarter. Federal Reserve Chairman Ben Bernanke last week said the recession was "very likely over."

The recession's end "is no longer a source of heated discussion ... but whether or not the economy can keep grinding forward (and at what speed) is still a big question mark," said BMO Capital Markets economist Jennifer Lee.

The index was boosted in August by supplier deliveries, rising stock prices, an increase in consumer expectations, a jump in building permits and the "interest rate spread."

That spread is the difference between yields on 10-year Treasury notes and the federal funds rate, which the Fed is keeping at a record low near zero.

A big difference is viewed as positive because investors are willing to lend for longer periods.

An accompanying index meant to measure the current state of the business cycle was flat in August. The July reading was revised up to a 0.1 percent gain from zero, making it the first increase in nine months.

The two indices suggest "the recession is bottoming out," said Conference Board economist Ken Goldstein.


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