Index of US economic health shows small gain in August, signalling moderate growth

WASHINGTON – An index of future U.S. economic health edged up slightly in August after a flat reading in July. The outcome in both months signalled economic growth could be moderating.

The Conference Board said Friday that its index of leading indicators rose 0.1 per cent in August following no change in July and a 0.6 per cent jump in June. The July reading had initially been reported as a decline of 0.2 per cent.

Conference Board economist Ataman Ozyildirim said the index was signalling that growth will be moderate through the rest of the year “with little reason to expect growth to pick up substantially.”

Economists at BMO Capital Markets said the performance of the index in August mirrored the mixed signals facing the Federal Reserve, which wrapped up a highly anticipated two-day meeting on Thursday with a decision to leave interest rates unchanged given all the uncertainty facing the global economy.

Five of the 10 forward-pointing indicators that make up the index increased with the largest contributions coming from favourable interest rates and a rise in building permits.

The biggest negative factor weighing on the index was the sharp fall in stock prices during the month, a turbulent period when investors grew concerned about developments in China, the world’s second largest economy.

While the Fed decided not to boost a key interest rate, which has been at a record low near zero since late 2008, many economists expect the central bank will raise rates at least once this year. The Fed has two more meetings this year — in October and December.