Economy: Worst May Be Over

Leading indicators suggest U.S. economy's weathered the worst

Leading indicators rise, hint at no lasting impact
from housing, gasoline
By Greg Robb, MarketWatch

(MarketWatch) -- Leading indicators of U.S. economic activity increased 0.3% in May, suggesting the economy may have weathered the storm of the housing slump and rising gas prices, the Conference Board said Thursday. Economists had been anticipating a 0.2% increase, according to a survey conducted by MarketWatch.

"Although choppy on a month-over-month basis in recent months, the underlying trend of the LEI points to continued modest real GDP growth in the near future," said Josh Shapiro, chief U.S. economist at MFR Inc. And a revision pointed to the leading indicators not as weak in April as first indicated. The leading index fell a revised 0.3% in April, up from a 0.5% decline reported last month.

"These data may be suggesting that the economy has weathered the negative impact of the housing slump and the spring run-up in gas prices," said Ken Goldstein, labor economist at the Conference Board.

In May, the coincident indicator, which measures where the economy is at present, rose 0.2%, the fourth straight monthly increase.

Over the past six months, the coincident index rose at a 1.6% annual rate. By comparison, the leading index is up at a 0.6% annual rate. Such a pace "could be maintained through the summer and perhaps into the fall," Goldstein said. May's lagging index rose 0.2%, mirroring the increase in April.

Batting .500
Five of the 10 leading indicators increased in May, led by jobless claims, stock prices and building permits.

Three indicators declined, led by money supply and factory hours, while new orders for consumer goods and orders for nondefense capital goods both held steady in May. In a separate report issued Thursday, the Labor Department said initial claims for state unemployment insurance rose for a third straight week, increasing by 10,000. Claims are now at their highest level since late April...