Leading Indicators rise 0.1% in May

NEW YORK – The U.S. Leading Economic Indicators rose in May, surprising analysts, The Conference Board reported today.
The trade group’s Leading Index – a predictor of the nation’s economic performance over the next three to six months – edged up 0.1 percent last month to 102.1 points (2004 = 100), matching its April gain. The index, previously thought to have risen 0.1 percent in March (READ MORE), now is considered to have held steady that month.
Analysts had expected the Leading Index to hold steady in May after rising in April, based on the mean prediction of 59 economists polled by Bloomberg News. (Their expectations ranged from a decline of 0.3 percent to an increase of 0.3 percent.)
Four of 10 leading indicators improved compared with April while three deteriorated, the board said. The biggest positive contributors last month were stock prices and Treasury yields. Smaller improvements were seen in manufacturers’ new orders for consumer goods and new order for non-defense capital equipment.
Losing ground last month were the nation’s real money supply (M2); the public’s mood, as measured by the Reuters/University of Michigan Consumer Sentiment Index, which fell again in June; permits for future housing construction, which fell nationwide last month along with housing starts, although both surged in the Northeast (READ MORE); supplier deliveries, which slowed in May; and new claims for unemployment insurance, which rose last month after falling in April.
The 10th indicator, average weekly manufacturing hours, held steady in May.
“In May, the six-month rate of decline in the leading index slowed to -0.7 percent (a -1.4 percent annual rate), from -2.4 percent (a -4.7 percent annual rate) in the six-month period through January,” the board noted in its report. “However, the weaknesses among the leading indicators have remained fairly widespread in recent months.”
Meanwhile, the Lagging Index continued to rise, gaining 0.1 percent to 112.4 points, after holding steady in April (based on revised data) and rising 0.4 percent in March. Three of seven components advanced last month, the board said: average unemployment duration, which fell; the Consumer Price Index for services; the ratio of manufacturing and trade inventories to sales; and the ratio of consumer installment credit to personal income. Losing ground were commercial and industrial loans outstanding; the average prime rate charged by banks; and the change in labor costs per unit output.
The Coincident Index – a measure of current economic activity – rose in May for the first time since October, edging up 0.1 percent to 106.8 points. “The index was revised down modestly for March and April as new component data became available,” the board noted. Increases were seen last month in two of the index’s components: personal income less transfer payments, and manufacturing and trade sales. The other two, industrial production and non-farm payrolls, both declined.
“Taken together, the behavior of the composite indexes so far continues to suggest weak economic activity in the near term,” the board said. Over the six months ended in May, the Lagging Index fell 0.7 percent, while the Coincident Index fell 0.4 percent. “We’ll have sluggish growth until the second half of next year,” Maxwell Clarke, chief U.S. economist at IDEAGlobal Inc. in New York, told Bloomberg News. “Given the state of the economy, manufacturers are reluctant to push any initiative to produce more.”
The Conference Board is a nonpartisan, nonprofit business membership and research organization with offices in New York City, Chicago and abroad. Additional information, including this month’s full Leading Economic Indicators report, is available at www.Conference-Board.org.