Jun 21, 2002 By Hope Yen Ap Business Writer 3 min read

NEW YORK (AP) – A key gauge of U.S. economic activity rose in May, boosted by continued strength in consumer spending, a private research firm said Thursday. The New York-based Conference Board reported its Index of Leading Economic Indicators rose 0.4 percent last month to 112.2 after falling a revised 0.3 percent in April. Analysts had forecast a 0.2 percent gain.

“Consumption has consistently fueled the recovery through the first half of the year,” said Conference Board economist Ken Goldstein. “The increase in the leading indicators now offers hope that economic performance may improve in the second half of the year.”

The index measures where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year. April’s drop was the first decline since September.

Economists said they were heartened that five of the 10 indicators making up the index improved in May, including a decline in average weekly initial claims for unemployment insurance.

Earlier Thursday, the Labor Department reported that the number of Americans filing new claims for unemployment insurance last week dipped by 2,000 to 393,000, offering hope for workers dealing with a stagnant jobs market.

“It’s good to see a turnaround,” said John Silvia, chief economist for Wachovia Securities, about the index’s rise. “It was a pretty broad gain. … I think the jobless claims being down suggests employment growth will be stronger going forward.”

The Commerce Department also reported Thursday that the U.S. trade deficit grew to a record $35.9 billion in April, pushed by American demand for foreign-made cars and consumer goods.

After slashing interest rates 11 times in 2001, Federal Reserve Chairman Alan Greenspan and his colleagues have held rates steady so far this year. Greenspan has said generally low inflation gives policy-makers the luxury of waiting to see how the recovery unfolds before boosting rates.

On Wall Street, the markets were lower Thursday morning, with the Dow Jones industrial average down 60 points at 9,501 and the Nasdaq composite index 13 points lower at 1,484.

In May, five of the 10 indicators that make up the leading index increased. They included real money supply, average weekly initial claims for unemployment insurance, index of consumer expectations, building permits, and vendor performance.

Negative contributors included stock prices, manufacturers’ new orders for consumer goods and materials, interest rate spread, and manufacturers’ new orders for nondefense capital goods. Average weekly manufacturing hours held steady in May.

The coincident index, which measures current economic activity, rose 0.1 percent in May to 115.8. The index of lagging indicators, which reflects changes that have already occurred, fell 0.2 percent last month to 100.9.

The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.

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