Leading index: Economy will muddle through

A monthly index forecasting economic performance in the United States continues to signal moderate growth one economist described as a “muddle through.”

The Conference Board reported that its Leading Economic Index (LEI) rose three-tenths of a percent in May to 95.8. The index has climbed 1.8 percent over the six-month period ending in May.

Separate measures of current and past economic performance also increased.

Taken together, the indexes suggest an expansion in economic activity should continue in the near term.

“Economic data in general reflect a U.S. economy that is growing moderately, neither losing nor gaining momentum. The result is more of a muddle through,” said Ken Goldstein, an economist with the Conference Board, a business research and membership group.

“Continued headwinds, both domestic and foreign, make further strengthening of the economy difficult,” Goldstein said.

Ataman Ozyildirim, another economist with the Conference Board, said weakness in such leading indicators as consumer expectations, the manufacturing workweek and stock prices kept the LEI from rising further in May. But the long-term trend for the index remains upward.

“It’s six-month growth rate remains in expansionary territory and well above its growth at the end of 2011, pointing to a relatively low risk of a downturn in the second half of 2012,” Ozyildirim said.

For May, seven of 10 components of the LEI advanced, including building permits, indexes for credit and new orders, interest rate spread and new orders for  manufactured capital and consumer goods, In addition, average weekly initial claims for unemployment benefits decreased. Retreating components included average weekly manufacturing hours, consumer expectations for business conditions and stock prices.

The Coincident Economic Index (CEI), a measure of current performance, rose two-tenths of a percent in May to 104.3. The CEI has gained 1.3 percent over the past six months.

For May, three of four components of the index increased: nonfarm payrolls, personal income and sales. Industrial production declined.

The Lagging Economic Index (LAG), a measure of past performance, climbed three-tenths of a percent in May to 115.2. The LAG has gained 1.2 percent over the past three months.

For May, four of seven components of the index advanced: commercial and industrial financing, consumer credit, labor costs and inventories. The price of services dropped while the average duration of unemployment increased. The average prime interest rate charged by banks held steady.

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