Two New Reports Indicate Moderate Economic Growth
May 16, 2011
NEW YORK -- U.S. manufacturing growth accelerated in August, growing for a third consecutive month in the latest suggestion of broad strength in the economy, according to a widely followed survey released on Tuesday. Separately, the index of leading indicators continued to rise, advancing 0.2% in July. It was the measure's sixth consecutive monthly increase. The reports come two weeks after the Federal Reserve decided to leave interest rates unchanged, apparently unable to find persuasive evidence the economy was growing so strongly that it threatened higher inflation. But with the latest signs of growth, Fed policy makers are considering raising interest rates one-half a percentage point unless they see clear signs this month of a slowing economy. The full text of the Conference Board's report on leading economic indicators for July and the National Association of Purchasing Management's report on manufacturing growth rate for August are available. The National Association of Purchasing Management's index rose to 52.6% in August from 50.2% in July. A reading above 50% is a sign of an expanding industrial economy. The purchasing managers' index was roughly in line with economists' expectations of a rise to 53%, and stock and bond prices pared early losses after the survey was released. Helping to ease inflation fears, prices paid by factories for raw materials fell for a third month in a row. The purchasing managers' price index rose to 47.4% in August, but remained below the 50% level, thus indicating that prices paid by manufacturers fell last month. In a separate report, the Conference Board reported that the index of leading indicators rose 0.2% in July to 103.1. That follows a 0.5% gain in June and a 0.2% increase in May. Wall Street had been expecting an increase of 0.1%. The July gain was the sixth straight increase for the index. Analysts generally consider three months of movement in the same direction to be indicative of a trend. The index is designed to forecast economic activity six to nine months in advance. It is seen by economists, however, as most useful in forecasting the economy's direction rather than its pace. The previous high for the index was 102.9, set in June. Although the index is periodically fine-tuned, figures from past years are revised using the current construction. The leading index was first calculated in the late 1960s and until recently was compiled by the government. The Conference Board, which is based in New York, took charge of the leading index late last year from the Commerce Department. It was privatized in an effort to save money.
