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US Recovery Expected to Brighten as Weather-Related Volatility will be “Short Lived”

H.S. Borji
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US Recovery Expected to Brighten as Weather-Related Volatility will be “Short Lived”

Overall economic activity in the United States strengthened last month, a sign the economy will be back on track with the return of milder weather.

The Conference Board’s Leading Economic Index rose 0.5 percent in February, following a 0.1 percent increase the previous month. A consensus of economists forecast the broad gauge of economic activity to rise 0.2 percent.

The February reading suggests “any weather-related volatility will be short lived and the economy should continue to improve into the second half of the year,” said Conference Board Ataman Ozyildirim in a press release.

Weak consumer demand was the primary challenge in February, as subdued wage growth continued to weigh on consumer optimism and spending. The sharp rise in building permits was cited as one of the biggest strengths last month, offering hope the housing sector can move forward after a disappointing winter.

The Federal Reserve said yesterday in a press release inclement weather was partly to blame for the broad slowdown this winter. The central bank reduced the pace of monthly bond purchasing by $10 billion, citing “sufficient underlying strength in the broader economy.”

The Fed’s plan to reign in record stimulus will present a clear challenge for the equities market, which will become more susceptible to weak economic data. For several years, quantitative easing has partly shielded the equities market from a volatile data wire.

The end of quantitative easing is good news for some. For currency traders, the unwinding of record stimulus will eventually lead to higher interest rates, which is expected to bolster the US dollar. The end of QE won’t have the same impact on all currency pairs, but will be enough to significantly alter the forex environment.

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