The Conference Board's Leading Economic Index (LEI) spiked by 0.7 percent in April up to 122.3, largely on the strength of improvements in housing. It was the second consecutive monthly increase for the LEI after experiencing a decline in February. The LEI jumped by 0.4 percent from February to March.
The latest LEI falls in line with many analysts' assessments that the slow economic growth experienced in Q1 was brought about by temporary factors such as a strong U.S. dollar, low retail sales, and lower exports. The Bureau of Economic Analysis reported in the first estimate for Q1 that real GDP grew at an annualized rate of just 0.2 percent during the quarter, only a fraction of the 2.8 percent that has been projected for the year. Real GDP grew at an annualized rate of 2.4 percent for the entire year of 2014.
"April’s sharp increase in the LEI seems to have helped stabilize its slowing trend, suggesting the paltry economic growth in the first quarter may be temporary," said Ataman Ozyildirim, Economist at The Conference Board. "However, the growth of the LEI does not support a significant strengthening in the economic outlook at this time. The improvement in building permits helped to drive the index up this month, but gains in other components, in particular the financial indicators, have been somewhat more muted."
Economists have remained positive but cautious for 2015's outlook despite the Q1 growth they termed as "paltry." They were particularly positive in the area of housing; a substantial increase in housing permits was largely responsible for the April spike in the Conference Board's LEI.
"The dismal growth in the first quarter does seem to be temporary," Ozyildirim said. "The sharp gain in the LEI was mainly helped by a large improvement in the housing permits component. That bodes well for housing as well as for the economy at large. But, the most recent trends in the LEI still point to a cautious outlook and while the first quarter performance may be temporary, the rest of the year isn’t likely to be particularly strong. The Conference Board is projecting about 2.3 percent real GDP growth in 2015."