By Evan Sully
(Reuters) -A gauge of future U.S. economic activity increased in July, suggesting the economy continued to expand from the recession caused by the coronavirus pandemic even in the face of a resurgence in cases fueled by the Delta variant.
The Conference Board on Thursday said its index of leading economic indicators (LEI) rose 0.9% last month to 116.0. Economists polled by Reuters had expected an increase of 0.8%.
Even though the U.S. economy is forecast to grow this year at its fastest pace since the 1980s, there are signs the recovery could be cooling off. Supply-chain bottlenecks continue to slow manufacturing growth, and consumer sentiment plummeted in early August to a decade-low as Americans gave faltering outlooks on everything from personal finances to inflation and employment.
Meanwhile, consumer price increases slowed in July, the Labor Department said last week, but inflation overall remained at a historically high level amid supply-chain disruptions as well as stronger demand for travel-related services.
“The U.S. LEI registered another large gain in July, with all components contributing positively,” said Ataman Ozyildirim, the Conference Board’s senior director of economic research. “While the Delta variant and/or rising inflation fears could create headwinds for the U.S. economy in the near term, we expect real GDP (gross domestic product) growth for 2021 to reach 6.0% year-over-year, before easing to a still robust 4.0% growth rate for 2022.”
The LEI’s coincident index, a measure of current economic conditions, rose 0.6% in July after increasing 0.4% in June.
But the lagging index increased 0.6% last month after being unchanged in June and increasing 0.8% in May.
“Even with more moderate growth in the second half of the year, the economy’s momentum remains encouraging with constraints on labor supply easing, a trove of excess savings still waiting to be drawn down, and strong vaccine numbers that will insulate the economy from the worsening health situation more so than prior waves,” said Mahir Rasheed, U.S. economist at Oxford Economics.
(Reporting by Evan SullyEditing by Paul Simao)