Indicators Rose in July despite Foreclosures for Sale

Despite the continued rise in mortgage delinquencies and repo homes for sale in many markets in the second quarter, leading economic indicators rose in July, according to the Conference Board.

The index of leading indicators increased by 0.6 percent in July, the fourth consecutive increase of the index. The index is designed to predict economic activity in the next 3 to 6 months.

With the continued rise of the index, analysts contend that the recession is bottoming out and that economic growth will soon begin. The gross domestic product, which has declined for 4 consecutive quarters, will likely grow this third quarter, according to Ken Goldstein, top economist of the Conference Board.

Economists set the value of the index by evaluating employment data, stock prices, GDP, interest rates, consumer confidence and other major factors that affect economic trends.

Wells Fargo economic analyst Tim Quinlan contended that the downturn ended in June based on the principles being applied by the National Bureau of Economic Research. He explained that the bureau, which is the agency officially calling the start and end of economic conditions, has historically set the date of the end of recessions after consecutive months of increases in the major economic indicators.

Economist Goldstein added that even when the recession is officially ended, consumers and businesses will still feel the effects and will not feel that the downturn has ended.

Another economist, Jennifer Lee of BMO Capital Markets, said the country probably experienced economic growth early in the quarter when Cash for Clunkers program pushed auto sales to higher levels.

The board said that 6 of the 10 major economic indicators that consist the Conference Board index rose in July, including stock prices and employment figures.

Among the 10 indicators, the biggest increase occurred in interest rate spread. This refers to the difference between federal funds rates and returns on ten-year Treasury securities. Federal funds rates are the rates charged by banks for loans they provide to each other. If the interest spread is higher, it is a positive sign because it means investors have the capability to lend for longer periods.

The Federal Reserve has been trying to keep the federal funds rate at near zero to help stabilize the market.

The negative factors are unemployment, delinquencies and foreclosures. Based on a report from the Mortgage Bankers Association, over 13 percent of homeowners nationwide are in default or in foreclosure largely because of unemployment.

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