Leading Economic Index Sees First Six-Month Increase in Two Years

The Conference Board’s index of U.S. leading economic indicators increased sharply for the second consecutive month in May and is up for the prior six-month period for the first time in two years.

The index, which is intended to estimate future economic activity, rose 1.2% between November 2008 and May 2009 — with five out of ten components advancing — beating estimates. The six-month increase marks the first time the index has risen over a six-month period since April 2007, and the strengths among the leading indicators have become balanced with the weaknesses during this period.

The index had been on a general downtrend since reaching a peak in July 2007.

The index was forecast to rise 1%, according to the median of 55 economists in a Bloomberg News survey, after an originally reported increase of 1% in April. Estimates ranged from a decline of 0.5% to a gain of 1.8%.

Seven of the ten indicators that make up The Conference Board LEI for the U.S. increased in May. The positive contributors – beginning with the largest positive contributor – were index of supplier deliveries (vendor performance), interest rate spread, stock prices, real money supply, index of consumer expectations, building permits, and manufacturers’ new orders for nondefense capital goods.
The negative contributors – beginning with the largest negative contributor – were average weekly manufacturing hours, average weekly initial claims for unemployment insurance (inverted), and manufacturers’ new orders for consumer goods and materials.

The Conference Board LEI for the U.S. now stands at 100.2 (2004=100). Based on revised data, this index increased 1.1% in April and decreased 0.3% in March.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, fell 0.2%, the smallest drop since October, after decreasing 0.3% the prior month. The index tracks payrolls, incomes, sales and production