Poor economic data knocks US recovery hopes

 
Julian Harris
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AMERICA’S recovery is struggling to gain momentum according to several pieces of economic data that disappointed analysts yesterday, including a sharp upturn in the number of new claims for unemployment benefit.

Initial claims for state unemployment benefits increased 34,000 last week, reaching a seasonally adjusted 386,000, the US Labor Department revealed.

The news came after Federal Reserve chairman Ben Bernanke told US politicians on Tuesday that high levels of unemployment will only fall at a “frustratingly slow” rate.

And a gauge of future economic activity, released yesterday, forecasts that the US recovery is set to hit the brakes. The Conference Board said its leading economic index dropped 0.3 per cent to 95.6 after rising 0.4 per cent in May – a more severe dip than economists had expected.

“The index is pointing to no strengthening over the next few months as the economy continues to sail through strong headwinds domestically and internationally,” said the Conference Board’s Ken Goldstein.

Meanwhile factory activity in the US mid-Atlantic region shrank for a third straight month in July, a separate report showed.

The Philadelphia Federal Reserve Bank said its business activity index rose to minus 12.9 from minus 16.6 in June, reflecting a slower pace of decline, but still falling short of economists’ forecasts.

Yet the forward-looking new orders sub-index gained to minus 6.9 from minus 18.8, revealing some hope that the downturn could bottom out.

There was also mixed news for the US housing market, as the National Association of Realtors said that existing home sales slipped 5.4 per cent to an annual rate of 4.37m units last month – the slowest pace in eight months and well below analysts' expectations. However, the median price for a home resale rose to $189,400, up 7.9 per cent annualised.