BUSINESS

Gauge of future health of US economy rises 0.7 per cent in April, largest gain in 9 months

05/21/2015 10:27 EDT | Updated 05/21/2016 05:59 EDT
WASHINGTON - An index designed to predict the future health of the economy rose in April by the largest amount in nine months, a sign that the economy is beginning to accelerate from a sharp slowdown during the winter.

The Conference Board said Thursday that its index of leading indicators rose 0.7 per cent last month, the biggest advance since a 1 per cent rise last July. The March increase was also revised up to show a 0.4 per cent gain, better than the initial 0.2 per cent estimate. Those two gains followed a decline of 0.2 per cent in February.

Economists at the Conference Board say that the solid rebound in April is evidence that the paltry economic performance during the first quarter should be a temporary slowdown.

But they cautioned that the pickup in activity could be moderate given that the April surge in the index was driven by a big jump in applications for building permits while other components of the index showed more modest increases.

Seven of the 10 forward-pointing indicators that make up the index showed strength in April with the largest boost coming from the surge in building permits followed by changes in interest rates.

An index of factory orders declined while average weekly manufacturing hours and new orders for consumer goods were unchanged in April.

The economy, as measured by the gross domestic product, grew by a meagre 0.2 per cent in the January-March quarter, according to the government's initial estimate. But many private economists believe growth will be rebound in the current April-June quarter to around 2 per cent.

"The main message being flashed by the leading economic index is that the winter economic slump is likely to prove temporary with better data-flow likely in the months immediately ahead," said Joshua Shapiro, chief U.S. economist at MFR Inc.