Economic Indicators Improve Despite Drag from Housing

A gauge of leading economic indicators in the United States improved in June, bolstering economists' forecasts of expansion in the year's second half.

The Conference Board's Leading Economic Index (LEI) edged up 0.3 percent last month to 102.2, flattening out slightly after May's 0.7 percent pickup.

"Broad-based increases in the LEI over the last six months signal an economy that is expanding in the near term and may even somewhat accelerate in the second half," said Ataman Oxyildirim, economist at the Conference Board.

Oxyildirim attributed the increase to ongoing positive trends in the labor market and an improved outlook for new manufacturing orders, which have helped offset some of the weakness observed in housing so far this year.

Indeed, the home market continued to provide some drag in the latest index, with housing permits proving to be weakest indicator.

The government reported earlier this month that total housing permits in June were down 4.2 percent month-over-month, though single-family permits ticked up 2.6 percent. Starts, meanwhile, declined on both sides as a decline in the South weighed down gains elsewhere in the country.

A stronger housing market, along with increased business investment, "could ... provide an upside to the overall economy," said Ken Goldstein, economist at the Conference Board.

Federal Reserve Chair Janet Yellen appears to feel the same way. In recent testimony before Congress, Yellen once again noted that the housing sector "has shown little recent progress."

"While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing," the Fed chief acknowledged.

Both of the measures tracking lagging and coincident economic metrics also improved. According to the Conference Board, the Coincident Economic Indicator for June increased 0.2 percent to 109.2, while the Lagging Economic Index was up 0.5 percent to 124.4.