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Housing troubles continue drag on economy

Economic index, consumer confidence below expectations

NAHB

The trouble in the housing sector, specifically Thursday's data on building permits, is holding down the economic outlook, expressed in the index of leading economic indicators which missed analyst expectations as it rose a lower-than-expected 0.3% in June.

Otherwise, the report is mostly positive with 7 of 10 components posting gains led by the yield spread, which reflects the Fed's stimulative monetary policy, and including the credit component which points to an increase in lending. The stock market is also a positive as are new orders in the manufacturing sector.

Other readings include a tepid 0.2% rise in the coincident index, which follows gains of only 0.3% and 0.2% in the two prior months and which will not confirm expectations for a big updraft in second-quarter GDP.

The Conference Board's index of leading indicators rose 0.5% in May, accelerating from a revised 0.3% gain in April. The yield spread, reflecting the Fed's near zero rate policy, once again is the leading component by a wide margin.

A negative in the report, however, was weakness in building permits in what points to continuing struggles for the housing sector.

This outlook is reflected in the Consumer Confidence Index, which dropped to 81.3, missing expectations and the lowest level since March.

This marks the third consecutive month of diminishing expectations and confidence.

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