Conference Board's Leading Indicators Fall in May

A widely watched gauge of economic activity slipped by 0.6 percent in May, the Conference Board said Thursday, suggesting that the nation's economy could weaken in coming months.

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The Conference Board, an industry-backed research group, said its Index of Leading Economic Indicators fell to 137.9 in May after it declined 0.1 percent to 138.7 in April.

The May figure was in line with what analysts had expected.

The index is watched closely because it's designed to predict economic activity three to six months in the future.

It was index's third decline in six months, and the lowest since a reading of 136.9 in October. The drop in the index comes as gasoline prices run high, interest rates creep up, and the housing market grows tepid.

Seven out of the ten indicators that comprise the leading index decreased in May — the biggest negative contributor was average weekly initial claims for unemployment insurance, followed by consumer expectations, real money supply, average weekly manufacturing hours, building permits, stock prices and vendor performance.

Three indicators improved in May — manufacturers' new orders for nondefense capital goods, manufacturers' new orders for consumer goods and materials, and interest rate spread.

Over the last six months, the biggest negative contributor to the leading index's drop has been declining housing permits.

The index's drop was one of many factors weighing on stocks Thursday, as the Dow Jones Industrial average fell 0.41 percent to 11,034.24 and the Nasdaq composite index fell 0.73 percent to 2,1125.55 in mid-morning trading. Wall Street has recently been plagued by worries about rising energy prices, inflation and a plodding economy.

On the New York Mercantile Exchange Thursday, crude oil prices rose to $70.62 a barrel in morning trading.

Also Thursday, the Labor Department said the number of Americans filing claims for unemployment benefits climbed by the largest amount in five weeks.

The Labor Department reported that 308,000 people filed for jobless benefits last week, a bigger-than-expected rise of 11,000 from the previous week.

Analysts, who closely watch jobless claims as a signal for where the labor market is headed, believe that job growth will flag in coming months and layoffs will rise as businesses adjust their hiring plans in the face of an expected economic slowdown.

The increase of 11,000 was the biggest rise since an increase of 19,000 applications in the week ending May 13. The 308,000 total claims was the highest level since claims hit 337,000 in the week ending May 27.

The overall economy expanded at a rapid clip of 5.3 percent in the first three months of the year, but that growth rate is expected to slow to around 3 percent in the current quarter as consumers struggle with rising interest rates, soaring gasoline prices and cooling home sales.

The Conference Board's index of coincident indicators, which measures current economic activity, rose 0.1 percent to 122.7. The index of lagging indicators, which reflects past performance, rose 0.2 percent to 123.0.

Signs of a slowdown have already shown up in a surprisingly weak increase of just 75,000 new payroll jobs in May — 100,000 below what economists had expected.

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