Economic recovery looks intact, housing recovery at risk

The US economic recovery appears likely to stay intact for at least a while longer, according to the Conference Board's index of leading indicators. From Bloomberg:

The index of U.S. leading economic indicators rose for the fifth straight month, capping the longest stretch of gains since 2004 and signaling a recovery is under way.

The Conference Board’s gauge of the economic outlook for the next three to six months rose 0.6 percent in August, in line with forecasts, after a 0.9 percent increase in July that was larger than previously estimated, according to data that the New York-based group released today...

The Conference Board’s index of coincident indicators, a gauge of current economic activity, was unchanged in August after increasing 0.1 percent the prior month. The index tracks payrolls, incomes, sales and production.

But it's too early to signal an all-clear as the housing market may be about to weigh on the economy again. From another Bloomberg report:

The recovering housing market may be heading for a relapse as President Barack Obama and Federal Reserve Chairman Ben S. Bernanke consider ending support for the source of the global financial crisis.

The Obama administration is studying whether to let a first-time home buyers’ tax credit expire as scheduled at the end of November. Bernanke and his Fed colleagues may continue talking this week about how to wind down purchases of mortgage- backed securities, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. The two programs have helped stabilize real-estate demand, with new-house sales rising 9.6 percent in July from the prior month, the most since 2005.

Ending these efforts may stifle the housing rebound by depressing sales and pushing up both mortgage-backed bond yields and interest rates on home loans, even in the face of the record-low zero to 0.25 percent short-term rates the Fed has engineered, said economist Thomas Lawler. A weaker housing market would likely dampen the economic recovery and undercut shares of builders including Fort Worth, Texas-based D.R. Horton Inc. and Miami-based Lennar Corp., that have risen 40 percent this year, based on the Standard and Poor’s Supercomposite Homebuilding Index of 12 companies.