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A measure of the U.S. economy's future health rose in solidly in April, buoyed by a sharp rise in applications to build new homes and apartments. The Conference Board index is intended to signal economic conditions three to six months out. (Photo: A construction worker installs a window in a new home at the Arbor Rose housing development in San Mateo, California. Photo by Justin Sullivan/Getty Images)
A measure of the U.S. economy's future health rose in solidly in April, buoyed by a sharp rise in applications to build new homes and apartments.
The Conference Board says its index of leading indicators (LEI) increased 0.6 percent last month to a reading of 95. That followed a 0.2 percent decline in March.
The index is intended to signal economic conditions three to six months out.
Conference Board economist Ken Goldstein said the index is 3.5 percent higher at an annual rate than it was six months ago, suggesting expansion for the economy. He said the biggest risk at the moment is the drag from cuts in federal spending.
“The biggest positive factor is the potential for improvement in the recovering housing and labor markets, said Goldstein. "The biggest unknown is the resiliency in confidence, both consumer and business.”
Another economist at The Conference Board, Ataman Ozyildirim, said housing permits and the interest rate spread helped the index in April.
"Labor market conditions also contributed, although consumers’ outlook on the economy remains weak," said Ozyildirim. "In general, the LEI points to a continuing economic expansion with some upside potential. Meanwhile, the CEI, a measure of current conditions, has returned to a slow growth path, despite declining industrial production in April.”
The index is composed of 10 forward-pointing indicators. Strength in April came from the surge in building permits, a drop in applications for unemployment benefits and a rising stock market.
Holding the index back in April: Weaker consumer confidence and a decline in the average hours worked at U.S. factories.
The job market has also improved over the past six months. The economy has added an average of 208,000 jobs a month since November. That's up from only 138,000 a month in the previous six months.
Unemployment has fallen to a four-year low of 7.5 percent.
A rebound in housing, along with a limited supply of homes for sale, has lifted the construction industry.
Construction cooled off in April, as builders broke ground on fewer homes after topping the 1 million mark in March for the first time since 2008. But most of the decline was in apartment construction, which tends to vary sharply from month to month.
The most encouraging sign for the industry last month was that applications for new construction reached a five-year peak. That suggests the housing revival will be sustained.
Builders are benefiting from a sustained rebound in housing that began a year ago. Steady job growth, rock-bottom mortgage rates and rising home values have boosted demand.
The overall economy grew at an annual rate of 2.5 percent in the January-March quarter, up from a rate of just 0.4 percent in the October-December quarter. The fastest expansion in consumer spending in more than two years drove economic growth in the first quarter.
Many economists expect growth is slowing slightly in the current April-June period to around 2 percent. Still, cheaper gas prices helped consumers boost spending at retail businesses last month. Consumer spending accounts for nearly 70 percent of economic activity.