Leading Economic Index up in May for second consecutive month

Austin Business Journal 

 A closely watched economic index in May showed the largest jump in more than five years, a promising sign that the worst of the recession may be over.

The Conference Board’s Leading Economic Index for the U.S. increased by 1.2 percent in May, following a 1.1 percent increase in April and a 0.3 percent decline in March. The LEI projects economic activity for the next three to six months.

Ken Goldstein, an economist at the New York-based research group, said confidence in the economy is beginning to improve.

“Confidence is rebuilding, and financial market volatility is abating,” he said. “Even the housing market appears to be stabilizing. If these trends continue, expect a slow recovery beginning before the end of the year. However, employment will take longer to turn around.”

In addition to gains in the LEI for the second consecutive month, the strengths among its components continued to exceed the weaknesses this month.

Vendor performance, interest rate spread, real money supply, stock prices, consumer expectations and building permits contributed positively to the index, more than offsetting the negative figures in weekly hours and initial unemployment claims.

The index rose by 1.2 percent (a 2.4 percent annual rate) between November 2008 and May 2009, the first time the index has been positive for a six-month period since April 2007. The strengths among the leading indicators became balanced with the weaknesses during this period.