Further evidence that the U.S. economy may be slowing came Thursday in the form of a 0.6% drop in The Conference Board’s Leading Economic Indicator for May.
The latest reading of the widely watched index comes on the heels of a 0.1% decline in April, and a 0.4% increase in March.
"The U.S. LEI has shown a weaker trend than countries in Europe or Asia,” said Ken Goldstein, labor economist at The Conference Board. “Strength abroad may be one factor counteracting the loss of domestic momentum. The cumulative impact of higher gasoline prices, higher costs to run the air conditioner this spring, a slowing housing market, higher interest rates, a loss of confidence (both business and consumer), and even higher taxes in some localities, have all combined to slow the forward pace of economic activity, pushing growth to a sub-par level this summer - possibly extending into the fall.”
Three of the 10 indicators that make up the leading index increased in May. The positive contributors - beginning with the largest positive contributor - were manufacturers' new orders for nondefense capital goods, manufacturers' new orders for consumer goods and materials, and interest rate spread.
The negative contributors - beginning with the largest negative contributor - were average weekly initial claims for unemployment insurance, index of consumer expectations, real money supply, average weekly manufacturing hours, building permits, stock prices, and vendor performance.
The LEI index is designed to predict economy activity three to six months in the future.