The Conference Board today announced that the U.S. leading index increased 0.5 percent in May from the previous month.

The leading index now stands at 116.5 (1996=100). Based on revised data, this index increased 0.1 percent in April and increased 0.8 percent in March. During the six-month span through May, the leading index increased 2 percent, with nine out of 10 components advancing (diffusion index, six-month span equals 90 percent).

The leading index 0.5 percent increase last month keeps the current growth rate of the leading index in the 3.5 percent to 4.5 percent range (annual rate), about the same as the approximately 4.5 percent growth rate since the low in March 2003.

The pickup in the growth rate of the leading index last year signaled stronger economic growth, and correspondingly, real GDP has increased at a 5 percent to 5.5 percent annual rate since the middle of last year. The current 3.5 percent to 4.5 percent growth rate of the leading index is signaling the continuation of this relatively strong rate of economic growth in the near term.

Eight of the 10 indicators that make up the leading index increased in May. The positive contributors – beginning with the largest positive contributor – were average weekly manufacturing hours, real money supply, interest rate spread, vendor performance, building permits, manufacturers’ new orders for consumer goods and materials, average weekly initial claims for unemployment insurance (inverted), and manufacturers’ new orders for nondefense capital goods. The negative contributors – beginning with the largest negative contributor – were index of consumer expectations and stock prices.

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