The index of U.S. leading indicators rose for a fourth consecutive month, manufacturing surged in the Philadelphia area and jobless claims climbed less than forecast, signaling the world’s largest economy is accelerating.
“The soft patch is behind us,” said Jonathan Basile, an economist at Credit Suisse in New York. “We have a little more momentum. Employers are getting a bit more optimistic about the outlook and don’t need to cut costs like before.”
The Conference Board’s gauge of the outlook for the next three to six months climbed 0.5 percent for a second consecutive time, capping the biggest back-to-back gains since February-March, the New York-based research group said today. Factories in the Philadelphia region expanded at the fastest pace of the year, and the number of workers seeking jobless benefits over the past four weeks fell to the lowest level in two years.
The reports indicated Federal Reserve efforts to spur growth will yield results in coming months as rising stock prices, near record-low interest rates and an improving job market help Americans repair tattered finances. The data gave stocks, already climbing after Ireland moved closer to getting a financial rescue from the European Union, a further boost.
The Standard & Poor’s 500 Index rose 1.7 percent to 1,198.07 at 11:55 a.m. in New York. Treasury securities dropped, sending the yield on the benchmark 10-year note up to 2.94 percent from 2.88 percent late yesterday.
The Philadelphia Fed’s general economic index rose to 22.5, the highest level since December, from 1 a month earlier. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The gauge was forecast to increase to 5, according to the median estimate of economists surveyed by Bloomberg News.
Applications for unemployment insurance payments rose by 2,000 to 439,000 in the week ended Nov. 13, Labor Department figures showed. The four-week moving average, a less volatile measure than the weekly figures, dropped to 443,000, the lowest level since September 2008.
“Growth is reaccelerating in the fourth quarter after a pretty sluggish third quarter,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “It’s still unclear how much it’s reaccelerating and how far the acceleration will go.”
Estimates for the leading index of the 58 economists surveyed ranged from gains of 0.2 percent to 0.8 percent.
The biggest contributors to the increase in the leading indicators were the spread between short- and long-term interest rates, and increases in stock prices and the money supply.
Bernanke said on Oct. 15 that more monetary stimulus would be warranted because inflation was too low and unemployment was too high. This month, policy makers announced a plan to purchase another $600 billion in Treasury securities to keep interest rates low and prevent inflation from slowing much more.
Shares rallied last month in anticipation of the Fed’s action. The October gain in the S&P 500 followed an 8.8 percent increase prior month, the best back-to-back performance in more than a year.
The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.1 in October after no change the prior two months. The gauge tracks payrolls, incomes, sales and production — the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.
The index of lagging indicators increased 0.1 percent last month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.
Seven of the 10 indicators that make up 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 money supply adjusted for inflation.
Gains in incomes and stock prices are helping households repair tattered finances more than a year into the economic recovery that began in June 2009.
Bank of America Corp., the biggest lender in the U.S., earmarked $5.6 billion for credit losses in the third quarter, down from $8.1 billion in the second quarter and $11.7 billion a year earlier. Net write-offs of uncollectible loans at the Charlotte, North Carolina-based lender declined 25 percent.
“Everything we see points to a continued recovery, albeit a slow recovery,” Bank of America Chief Executive Officer Brian T. Moynihan said at a company-sponsored conference Nov. 16. Commercial lending is starting to turn around and consumers are spending more on leisure, he said.
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