The Conference Board said that the Leading Economic Index (LEI) increased 0.1 percent in May, slower than the 0.8 percent gain in April. Much of April’s rise was attributed to strong housing permits numbers. With the decrease in permitting in May below the one million mark, housing provided a negative contribution this time around, subtracting 0.1 percentage points from LEI. The other element that lifted April’s figure was a rising stock market, and that continued to be a positive in May’s index, adding 0.17 percentage points.
The manufacturing sector struggled in May, and as such, the various production measures provided a drag on the LEI. In particular, the contraction of the Institute for Supply Management’s purchasing managers’ index for the first time since last November had a negative impact, with declining new orders subtracting 0.13 percentage points from the overall LEI. The average workweek for production workers and two other measures of new orders provided a slight negative contribution, subtracting another 0.01 percentage points in total.
Other variables were mixed. The availability of credit and the interest rate spread added to the LEI; whereas, higher average weekly unemployment claims were a negative. Despite an increase in consumer confidence, it did not provide a contribution to the LEI this time around.
Meanwhile, the Coincident Economic Index (CEI) – which measures the current climate – rose 0.2 percent in May, increasing for the fourth straight month. Industrial production was unchanged last month, so it had no effect on the CEI. The largest contributors to improvements in the CEI’s growth in May stemmed from gains in nonfarm payrolls and personal income. With that said, the employment numbers for manufacturing were less positive, with employment in the sector down for three straight months.
Chad Moutray is the chief economist, National Association of Manufacturers.
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