Leading Indicators Rise for Third Straight Month

But the report isn't doing anything to help stocks on Monday.
Publish date:

The U.S. leading economic indicators rose in June for the third consecutive month, spurring hopes that a second-half recovery will finally become a reality, but the report wasn't helping stocks on Monday.

The Conference Board reported its index of leading economic indicators rose 0.1% last month, in line with economists' estimates, following a 1.1% increase in May and a 0.1% advance in April. The figure indicates how economic activity is expected to fare in the next three to six months.

The main drivers were an increase in money supply, coupled with gains in the stock market and a higher number of permits for new home construction. The

S&P 500

climbed 1.1% in June, while building permits rose 0.8% during the month.

"There was a clear bounce over the last few months, which is consistent with second-half growth," said Jim O'Sullivan, senior economist at UBS Warburg, who projects gross domestic product will grow at a 3.5% annual rate in the third quarter and 4.5% in the fourth quarter, yielding an average 4% for the second half of 2003.

O'Sullivan also said "the major part of the bounce was in the stock market, which is a result of the economy doing better. And business investment should follow, helping the index rise even further in the next few months."

In addition to business spending, he said observers are watching the labor market closely and hoping for signs of improvement; neither had an effect on the June leading indicators. The Institute for Supply Management said new orders and deliveries fell in June, indicating corporate demand continues to be weak. Meanwhile, the Labor Department said earlier this month that the unemployment rate hit 6.4% in June. Nonfarm payrolls fell by 30,000.

The economy grew at a 1.4% rate in the first quarter and is forecast to have advanced 1.9% in the second quarter.