US housing, leading index improve: eco preview

US housing, leading index improve: eco preview
The Financial Express, October 20, 2009, Page 5

Bloomberg

Homebuilders and real-estate agents were probably busier in September, and the index of leading indicators increased, adding to evidence the next US expansion has begun, economists said before reports this week.

Construction started last month on 6,10,000 houses at an annual rate, the most since November, according to the median forecast of 53 economists surveyed by Bloomberg News before an October 20 Commerce Department report. Sales of existing homes rose to a two-year high and the gauge of the economy's future course advanced for a sixth month, other reports may show.

Housing is stabilising as Americans take advantage of government programmes, including credits for first-time buyers and efforts to lower borrowing costs, aimed at stemming the recession. Some Federal Reserve policy makers remain concerned the economy will relapse should the stimulus be removed too soon, signaling interest rates will remain low for months.

"The housing market is recovering from very depressed levels," said Zach Pandl, an economist at Nomura Securities International Inc in New York. "We're definitely emerging from recession, finding a bottom in some sectors, but the recovery is still uneven and it's not particularly vigorous."

Building permits, a sign of future activity, may have risen to a 5,90,000 pace, also the highest since November, the Commerce Department's report on housing starts may show, according to the survey median.

In April, builders broke ground on new homes at a record-low 4,79,000 pace.

The index of leading economic indicators, due from the New York-based Conference Board on October 22, may have risen 0.9%, according to the survey of economists. The gain was probably driven by the increase in building permits, a drop in claims for jobless benefits and an improvement in consumers' outlooks, economists said.

A sixth consecutive gain in the leading index would mark the best performance since early 2004.

US stocks have risen in recent weeks amid better-than-forecast earnings and signs the economy is improving. The Standard & Poor's 500 Index closed at the highest level in a year on October 15.

Google Inc, the world's most popular Internet search engine, plans to resume hiring and acquisitions after the recovering economy helped third quarter sales beat analysts' estimates. Large customers stepped up spending on Google ads last quarter, a rebound from the first half of the year, chief financial officer Patrick Pichette said.

“We weathered what is an incredible recession,” Pichette said in an interview last week. “If you have all this behind you, the only outcome you should have as management is: OK, let's build now.”

Fed policy makers at their September meeting decided to slow purchases of mortgage securities to avoid disrupting the housing market while extending the duration of the program by three months. In the minutes of the September 22-23 meeting, which were released last week, they noted the housing market and retail sales got a boost from government incentives.

The Fed's Beige Book report on regional economies, scheduled to be released on October 21, will be used by policy makers to gauge the state of the housing market and the economy overall when they meet again in the first week of November.

An October 23 report from the National Association of Realtors may show that sales of existing homes rose to a 5.35 million rate last month, according to the Bloomberg survey. That would be the highest level since August 2007.

On Monday, a report may show builder confidence continued to climb this month. The National Association of Home Builders/Wells Fargo index probably rose to 20 from 19, economists surveyed said. It would be the seventh straight increase. While higher, readings less than 50 still signal that most respondents view conditions as poor.

Finally, a Labour Department report on October 20 may show wholesale prices were unchanged in September, compared with a 1.7% increase a month earlier. Excluding food and energy, prices increased 0.1%, compared with a 0.2% gain in August, according to the survey, indicating inflation isn't a risk as the economy recovers.