By Shobhana Chandra
Dec. 18 (Bloomberg) -- The index of U.S. leading economic indicators probably fell in November for the fourth time in five months, reflecting the worsening outlook that led the Federal Reserve to slash interest rates and pledge unlimited purchases of securities, economists said before a report today.
The Conference Board’s gauge of the economy’s direction over the next three to six months dropped 0.4 percent, according to the median forecast in a Bloomberg News survey. Other reports may show jobless claims remained elevated and the manufacturing slump accelerated.
The leading index underscores economists’ projection that the U.S. recession will be the longest in the postwar era as banks restrict credit, home and stock values plunge and job losses mount. President-elect Barack Obama has proposed the biggest public-works spending package since the 1950s as part of the government’s effort to limit the damage and revive growth.
“There’s just a lot of pessimism on the economy,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. “The job cuts will continue, and that’s a real damper on consumer sentiment and spending. We’ll see more weakness in manufacturing.”
The leading index is due at 10 a.m. New York time. Estimates of the 55 economists surveyed ranged from a decline of 1 percent to no change. The gauge dropped 0.8 percent in October.
Also at 10 a.m., the Philadelphia Fed may report its general economic gauge fell to minus 40.5 this month, the lowest level since October 1990, according to the survey median. Negative readings indicate contraction.
Jobless Claims
A Labor Department report at 8:30 a.m. is projected to show 558,000 workers filed first-time claims for unemployment insurance benefits last week. The number of applications jumped to a 26-year high of 573,000 the prior week.
Fed policy makers on Dec. 16 said they will target a federal funds rate of between zero and 0.25 percent and buy unlimited quantities of debt as the next step in combating the recession.
“The outlook for economic activity has weakened further,” the Fed said in a statement. The central bank “will employ all available tools” to revive growth and preserve price stability.
Last month’s 8 percent drop in stock prices, increase in initial jobless claims and plunge in building permits to a record low probably paced the decrease in the leading index, economists said.
Consumer confidence also tumbled. The Reuters/University of Michigan sentiment index fell in November to a 28-year low, and the gauge of expectations for six months from now, a proxy for future spending, also declined.
Credit Crunch
Mike Jackson, chief executive officer of AutoNation Inc., the largest publicly traded U.S. car retailer, said sales have declined “practically to a standstill” because lenders are retrenching.
“The credit is simply not there from the financial institutions to finance those customers: they’re turning away very good customers,” Jackson said in a Bloomberg Radio interview on Dec. 4.
Seven of the 10 indicators for the leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. The Conference Board estimates new orders for consumer goods, bookings for capital goods, and the money supply adjusted for inflation.
Bloomberg Survey
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Initial Cont. LEI Philly
Claims Claims Fed
,000’s ,000’s MOM% Index
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Date of Release 12/18 12/18 12/18 12/18
Observation Period Dec. 13 Dec. 6 Nov. Dec.
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Median 558 4375 -0.4% -40.5
Average 561 4393 -0.4% -40.6
High Forecast 600 4450 0.0% -35.0
Low Forecast 530 4350 -1.0% -47.9
Number of Participants 42 9 55 53
Previous 573 4429 -0.8% -39.3
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4CAST Ltd. --- --- -0.5% -42.5
Action Economics 550 4375 0.0% -39.0
AIG Investments --- --- -0.2% -35.0
Aletti Gestielle SGR 560 --- --- -40.8
Ameriprise Financial Inc 550 4390 -0.4% -36.0
Argus Research Corp. --- --- -0.3% -40.0
Banc of America Securitie --- --- -0.3% -39.3
Bank of Tokyo- Mitsubishi 555 --- -0.7% -38.5
Bantleon Bank AG --- --- -0.3% -39.0
Barclays Capital 550 --- -0.4% -45.0
BMO Capital Markets 580 --- -0.5% -41.0
BNP Paribas 563 --- -0.6% -40.2
Briefing.com --- --- -0.5% -35.0
Citi 600 --- -0.1% -45.0
Commerzbank AG 575 --- -0.5% -43.0
Credit Suisse 600 --- -0.1% ---
Daiwa Securities America --- --- -0.1% ---
Danske Bank --- --- --- -40.5
Desjardins Group 548 --- -0.1% -39.0
Deutsche Bank Securities --- --- -0.4% -40.0
Deutsche Postbank AG --- --- -0.5% ---
Dresdner Kleinwort --- --- -0.2% -44.0
DZ Bank --- --- -0.4% -41.0
First Trust Advisors 569 --- -1.0% -39.8
Fortis --- --- --- -40.0
FTN Financial --- --- --- -41.0
Goldman, Sachs & Co. --- --- -0.2% ---
Helaba 560 --- 0.0% -40.0
Herrmann Forecasting 563 4365 -0.3% -41.1
High Frequency Economics 550 --- 0.0% -39.3
HSBC Markets 550 --- -0.2% -39.0
IDEAglobal 565 --- -0.5% -43.0
ING Financial Markets 550 --- -0.6% ---
Insight Economics 570 --- -0.5% -42.5
Intesa-SanPaulo --- --- --- -42.0
J.P. Morgan Chase 550 --- --- -42.0
JPMorgan’s Private Wealth 550 --- -0.5% -41.0
Landesbank Berlin 550 --- -0.7% -38.0
Maria Fiorini Ramirez Inc 560 --- -0.4% ---
Merrill Lynch 580 --- -0.4% -42.0
MFC Global Investment Man 550 4435 --- ---
Mizuho Securities 560 --- -0.5% -42.0
Moody’s Economy.com 570 --- -0.6% -41.5
Morgan Stanley & Co. --- --- 0.0% ---
National City Corporation --- --- -0.3% -43.4
Newedge --- --- --- -41.0
Nomura Securities Intl. --- --- --- -35.0
Nord/LB 575 --- -0.4% -36.0
PNC Bank --- --- -0.4% ---
Raymond James 540 --- -0.1% ---
RBS Greenwich Capital 570 --- -0.2% ---
Ried, Thunberg & Co. 550 4350 --- -40.0
Schneider Foreign Exchang 530 4375 -0.5% ---
Scotia Capital 580 --- --- -45.0
Societe Generale --- --- --- -39.0
Standard Chartered --- --- -0.5% -43.0
Stone & McCarthy Research 555 --- -0.4% -47.9
TD Securities 575 4450 -0.5% -40.0
Thomson Financial/IFR 575 4450 -0.6% -38.0
Tullett Prebon 553 --- -0.4% -41.0
UBS Securities LLC 550 --- 0.0% -42.0
Unicredit MIB 540 --- -0.5% ---
University of Maryland --- --- -0.5% ---
Wachovia Corp. --- --- -0.4% ---
Wells Fargo & Co. 550 --- 0.0% -39.0
WestLB AG --- --- -0.4% -40.5
Westpac Banking Co. 590 --- -0.8% -45.0
Wrightson Associates 550 4350 --- -40.0
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To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
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