Economic Watch: Leading Indicators Rise, Interest Rates Staying Put
A look at where the U.S. economy is headed in the next three to six months showed another rise, according to a new report from the private research group The Conference Board.
Evan Lockridge・Former Business Contributing Editor
March 19, 2015
Photo: Revisorweb via Wikimedia Common
3 min to read
Photo: Revisorweb via Wikimedia Common
A look at where the U.S. economy is headed in the next three to six months showed another rise, according to a new report from the private research group The Conference Board.
Its Leading Economic Index increased 0.2% in February from the month before to 121.4. This follows a 0.2% gain in January, and a 0.4% increase in December. This latest figure is less than the average from the final half of last year, but met many analyst expectations.
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“Widespread gains among the leading indicators continue to point to short-term growth,” said Ataman Ozyildirim, economist at The Conference Board. “However, easing in the LEI’s six-month change suggests that we may be entering a period of more moderate expansion. With the February increase, the LEI remains in growth territory, but weakness in the industrial sector and business investment is holding economic growth back, despite improvements in labor markets and consumer confidence.”
The Conference Board’s Coincident Economic Index, which measures current economic activity for the U.S., increased 0.2% in February to 111.9, following a 0.2% improvement in January, and a 0.3% increase in December.
The Lagging Economic Index, which measures U.S. economic activity of previous months, increased 0.3% in February to 115.8, following a 0.3% gain in January, and a 0.2% increase in December.
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The moderate economic growth Ozyildirim pointed to is the main reason the U.S. Federal Reserve on Wednesday modified its stance on earlier announced plans to raise interest rates, which have been at or near zero for several years.
In a statement the central bank said its Federal Open Market Committee is holding off on increasing interest rates until it has seen “further improvement” in the U.S. labor market and is confident inflation will be at an annual rate of 2%, well above its current level of around 0%.
It also cautioned “this change in the forward guidance does not indicate that the committee has decided on the timing of the initial increase". Previously, the Fed said it would be “patient” on determining when it would raise interest rates, but on Wednesday removed such language, leading some wondering if officials had run out of patience.
“Given the downward revision to the Fed’s forecast for rates and inflation over the next one to two years, we suspect there is more than enough concern among committee members regarding lingering, low inflation to keep the Fed on hold,” said Lindsey Piegza, chief economist at Sterne Agee. "After all, we’ve seen this wordsmithery before. Recall the Fed replaced ‘considerable time’ with ‘patient,’ two phrases which arguably mean the exact same thing. This time the Fed has replaced ‘patient’ with a lower assessment of inflation and rates which will similarly act as more than enough of a barrier for committee members to exercise patience in initiating liftoff [of higher interest rates].”
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