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Report Suggests Worst May Be over for US Economy
Despite President George W. Bush's comment Wednesday that the US economy is "sputtering," a closely watch survey suggested that the worst of the economic downturn may be over.
The Conference Board's index of leading economic indicators -- a measure of economic activity in the coming six to nine months -- rose 0.5 percent in May after a 0.1 percent increase in April.
The rise was bigger than expected on Wall Street and marked the second straight increase for the index after declines in February and March.
Separately, Bush told the Business Roundtable, a group of chief executive officers of the largest US companies that "our economy is sputtering" but suggested that the tax cut he signed is likely to provide some relief.
The Conference Board, a business research group, said that the rise in the index suggests a limited rebound in coming months.
The latest readings "suggest the US economy may be poised for some recovery," said Conference Board economist Ken Goldstein.
"Continued though modest strength in services and some limited recovery in manufacturing is a combination likely to deliver limited job, income and gross domestic product growth over the next few months, barring any sudden economic shock," he added.
Two other indexes released by the board suggest the worst of the US economic downturn may be near or over.
The coincident index held steady, and the lagging index decreased by 0.2 percent in May.
"Taken together, the three composite indexes and their components suggest that the period of slow growth in the US economy will continue in the next few months," the board said.
The rise in the leading index reflects the series of rate cuts by the Federal Reserve to stimulate the sputtering economy, the board said.
The US economy expanded at a sluggish pace of 1.3 percent in the first quarter after last year's red-hot pace, according to government estimates. And many economists suggest the pace of the second quarter may be even slower.
The abrupt slowdown has suggested the economy could slip into recession, but many economists are predicting the worst may be a period of sluggish growth, with a rebound fueled by a series of interest rate cuts and the 1.35 trillion dollar tax cut passed Congress.
Merrill Lynch economist Karen Dexter said the economic indicators suggest an upcoming uptick in growth by later this year.
"The index of leading indicators suggests that economic growth is bottoming," she said. "We expect a pickup in growth to become visible in the third quarter and a rebound by the fourth quarter."
Others contend the economy is not out of the woods yet and that the Fed needs to continue its aggressive rate cutting policy.
Federal Reserve chairman Alan Greenspan, who appeared before a Senate panel, suggested that consumer spending -- seen as a key to economic resilience -- appears to be holding up.
Greenspan said that despite layoffs associated with the US economic slowdown, there has not yet been "any real serious deterioration" in consumer spending.
Despite declining consumer confidence surveys, the Fed chairman said "we have not yet seen any real serious deterioration in the actions that people take."
"I think what you have to argue that the ultimate measure of consumer confidence is not the statistical calculations we make ... but what do people do, and so far they have exhibited a fairly high degree of confidence," he said.
"To be sure, consumer expenditures have not been going up in any material way, but they have held their own," he said. Greenspan also said the spike in energy costs
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