More positive indicators for the U.S. economy

Despite continued projections for slow growth through the end of 2012, a bevy of more positive metrics also indicates the U.S. economy overall may be in the process of “stabilizing” as well.

For example, the Conference Board noted that its Leading Economic Index (LEI )for the U.S. increased 0.4% in July to 95.8 (2004 = 100), following a 0.4% decline in June and a 0.3% increase in May - indicating that the U.S. economy seems to be sticking to what Ataman Ozyildirim, one of the group’s economists, terms a "slow but steady" growth pattern.

“With this month's increase, the U.S. LEI returned to its May level [as] the majority of its [economic] components improved, led by large contributions from housing permits and initial unemployment claims,” he noted.

“The LEI's six-month growth rate seems to be stabilizing, pointing to a continuing but slow expansion in economic activity for the rest of the year,” Ozyildirim added. “Meanwhile, the coincident economic index, a measure of current conditions, has been rising slowly but steadily, with all four components improving over the last six months.”

Ken Goldstein, another economist with the Conference Board, pointed out that the current run of economic indicators point to slow growth through the end of 2012. However, while lack of overall domestic demand remains a big issue, “back-to-school sales” are better than expected, suggesting that the consumer is starting to come back.

“Retail sales this time of year are often an indicator of how the holiday season will turn out,” he noted.

Data compiled by Harris Private Bank (HPB), part of BMO Financial Group, for its Fall Outlook for Financial Markets report dovetails with the Conference Board’s findings to a degree, as the bank’s research indicates that while the U.S. economy continues to face an uphill recovery, a variety of sectors are witnessing "significant growth."

HPB’s report noted, though, that the U.S. economy slowed to an annualized 1.5% growth rate in the second quarter this year, down from a 2% the first quarter.

Overall, incomes in the U.S. rose 0.5%, pushing the nation's savings rate to 4.4% as consumer spending stagnated, though there’s some concern over the savings rate, added Jack Ablin, HPB’s chief investment officer.

“This trend we're seeing toward saving and debt reduction, while good on an individual level, can have a disastrous effect on the larger economy if everyone does it,” he cautioned. “Consumption accounts for more than two-thirds of domestic economic activity and, as such, is a major driver to this economic recovery.”

However, a new series of what the bank calls “positive indicators” include continued stabilization in the U.S. housing sector as a result of low interest rates and early recognition of troubled loans, with the manufacturing sector making gains through inventory building, rather than user demand, focusing on stock as current inventory levels are below historic norms.

Ablin also noted that the Standard & Poor’s 500 benchmark index gained nearly 12% in 2012 despite less positive results in foreign markets, while the MSCI EAFE index of advanced economy stocks gained approximately 5% this year as emerging market equities witnessed growth of slightly more than 6% for the year.