A trio of economic reports put out this morning (March 20) provided fresh evidence that the economy has slowed, although one, the Business Outlook Survey from the Federal Reserve, was better than Wall Street expected.
The first of these reports, initial jobless claims from the U.S. Labor Department, showed an increase of 22,000 to 378,000 from 356,000 the previous week. The four-week moving average was 365,250, an increase of 6,000 from the previous week. Both numbers were higher than economists expected.
Separately, the Conference Board released its Leading Economic Indicators for February, which showed a 0.3% decline, the fifth is as many months. The Conference Board said its coincident index remained unchanged and its lagging index increased 0.2%.
Downward pressure was exerted on the leading index by four major components of the index, including initial jobless claims, building permits, vendor performance and consumer expectations, which more than offset positive contributions from money supply (real M2)* and interest rate spread. The Conference Board said the leading index has declined 1.5%, or 3% on an annualized basis, between August 2007 through February 2008.
"The leading index has been on a downtrend since the middle of 2007, and the weaknesses among its components have become very widespread in the last three months; the last time the leading index worsened for five consecutive months was in early 2001," the Conference Board said in its statement. "Real GDP growth fell to 0.6% in the fourth quarter of 2007, down from a 4.9% annual rate in the third quarter and an average of 2.2% annual rate in the first half of 2007. The current behavior of the composite indexes suggests that increasing risks for economic weakness are likely to continue in the near term."
The third report, the March Business Outlook Survey from the Philadelphia Frederal Reserve, showed continued weakness in manufacturing activity in the Philly Fed's region, which includes much of the Northeast Corridor. Moreover, it showed that not only is activity weak, but manufacturers are facing increasing pricing pressure. Still, the Philly Fed said "Most future indicators rebounded this month, after having reached their lowest readings since 2001 last month."
The survey¹s broadest measure, the diffusion index of current activity, improved from -24.0 in February to -17.4 in March, its fourth consecutive month in negative territory. 51% of the firms reported no change in activity from February, but the percentage of firms reporting decreases (33%) remained greater than the percentage reporting increases (15%).
Demand for manufactured goods rose slightly, from -10.9 to -9.3. The current shipments index increased from -12.2 to -6.3. Indexes for both unfilled orders and delivery times remained negative, and both declined from their readings in February.
Decreases in employment were reported by 20% of firms, slightly higher than those reporting an increase (15%). The current employment index fell from2.5 to -4.7, its second negative reading in three months. Weakness was most evident this month in hours worked: 21 percent indicated declines in average hours worked; 11 percent reported increases. The average workweek index dropped from -3.9 in February to -10.0 this month.