The Conference Board reported on Thursday that its Leading Economic Index surged 0.3 percent in May, suggesting the US economy remained on a moderate growth path despite fears that growth had slowed. However, gains were limited somewhat by a slight shortening of the average workweek in the manufacturing space, the poorly performing stock markets and a decline in consumer confidence. The advance in the index of leading economic indicators followed a 0.1 percent decline in the index in April, and was ahead of the consensus estimate from economists in a recent FactSet survey, who projected a gain of just 0.1 percent.
Seven of the 10 indicators that make up the Conference Board's index made gains last month, led by an increase in building permits, which contributed heavily to the overall gain. The group's index of coincident indicators, which measures current economic conditions, rose 0.2 percent, matching April's gain, and the index of lagging indicators rose 0.3 percent after climbing 0.6 percent in April. The index of coincident indicators tracks data that is used by the National Bureau of Economic Research to determine the beginning and end of recessions, such as payrolls, production, sales and incomes.
The Federal Reserve announced on Wednesday it is extending the so-called Operation Twist program in which it converts short-term assets in its portfolio for longer term securities. The move was in response to a string of disappointing data in recent weeks that collectively show the strength of the economic recovery waning. The US labor market has been particularly disconcerting, as employers created just 69,000 jobs in May, the fewest in about a year. Investors had been hoping the Fed would launch QE3, or a third round of quantitative easing, where the Treasury Department buys up thousands of bonds in an attempt to stimulate spending by keeping interest rates down. Fed Chairman Ben Bernanke noted that the Fed stands ready to act if conditions get worse.