Index forecasts more rapid economic growth

An index forecasting economic performance in the United States continues to rise, signaling what’s expected to be more rapid growth in the months ahead.

The Conference Board Leading Economic Index rose another half of a percent to 101.7 in May. The latest monthly gain was the fourth in a row and brings the proportional increase in the index over the past six months to 2.3 percent.

Separate measures of present and past economic performance also increased in May.

“Housing permits held the index back slightly, but the LEI still points to an expanding economy and its pace may even pick up in the second half of the year,” said, Ataman Ozyildirim, an economist for the Conference Board.

Ken Goldstein, another economist for the business research and membership association, said the latest information forecasts what could be a more robust expansion. “Going forward, the biggest challenge is to sustain the rise in income growth, which will drive consumption.”

Gross domestic product, the broad measure of goods and services produced in the country, contracted at an annual rate of 1 percent during the first quarter, but could rebound and grow by more than 2 percent, Goldstein said.

For May, seven of 10 indicators of the Leading Economic Index advanced: average weekly manufacturing hours, interest rate spread, indexes for leading credit and new  orders, new orders of consumer goods and stock prices. A decrease in average weekly claims for unemployment insurance also bolstered the index. Building permits retreated. New orders for capital goods and consumer expectations for business conditions held steady.

The Coincident Economic Index, a measure of current performance, rose three-tenths of a percent to 109 in May. The index has increased 1 percent over the past six months. All four components of the index advanced in May: industrial production, nonfarm payrolls, personal income and sales.

The Lagging Economic Index, a measure of past performance, increased four-tenths of a percent to 123.8 in May. The index has gained 1.3 percent over the past three months. For May, five of seven components advanced: commercial and industrial finance, consumer credit, cost of services and labor costs. A decrease in the average duration of unemployment also pulled up the index. Inventories and the average prime rate charged by banks remained unchanged.