An index designed to predict the future health of the U.S. economy declined slightly in July yet still pointed to modest growth in the months ahead.
The Conference Board said Thursday that its index of leading indicators dropped 0.2 percent in July, after healthy gains of 0.6 percent in both June and May.
The index "is still pointing to moderate economic growth through the remainder of the year," Ataman Ozyildirim, director of growth research at the Conference Board, said. July's decline was primarily driven by a sharp fall in building permits.
The leading index is composed of 10-forward pointing indicators. Seven of the 10 indicators advanced in July while two — building permits and stock prices — declined. One indicator, average weekly manufacturing hours, was unchanged.
Building permits had risen sharply in the previous three months ahead of the expiration of a tax incentive in New York. Once that tax break ended, building permits for apartment buildings fell sharply last month.
The decline in the index "is much less important than it appears, because it all reflects the plunge in building permits," Ian Shepherdson, an economist at Pantheon Macroeconomics, said in a note to clients.
Yet developers are breaking ground on more new homes. Single-family home construction rose in July to its fastest pace since the Great Recession began in late 2007, the government said Tuesday.
And on Thursday, the National Association of Realtors said that sales of existing homes jumped to an eight-year high last month. Low mortgage rates and steady job gains are driving a recovery in housing.
The indicators that improved last month included weekly applications for unemployment benefits, new orders received by factories for consumer goods, and an index measuring the availability of credit.
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