Key Economy Index Shows Paltry Gain : Indicators Point to Later Growth Despite Sluggish 0.2% Tally

The government’s main gauge of future economic activity rose a slight 0.2% in May, substantially below the pace of the last three months, the Commerce Department said today.

The department said the gain in its Index of Leading Indicators was down from a robust 1.3% increase in April, the strongest advance in almost three years. In March, the index had risen a solid 0.6% after a 1% February gain.

Still, analysts said the four consecutive monthly increases point to an economy that should begin performing better in the second half of the year. The index is designed to give an indication of economic growth six to nine months in the future.

White House spokesman Larry Speakes said that, “with interest rates again dropping lower and leading indicators still climbing, we expect strong third- and fourth-quarter growth to continue to fuel the Reagan economic expansion, now in its 43rd month.”

Economic growth in 1986 has been disappointing, with unemployment rising in May to 7.3% as weakness in manufacturing and oil and gas drilling contributed to a 212,000 increase in the number of people out of work.

Forecasters Doubtful

The Reagan Administration is predicting that the economy will grow at a 4% rate this year, as measured by the gross national product. Private forecasters have expressed doubts, however, that growth will be much different from last year’s weak 2.2% GNP increase. They contend that much of the strength in recent months in the leading index has been concentrated in the financial sector as barometers of actual production have remained sluggish.

In May, six of 11 available indicators posted gains. The largest positive factor came from an increase in the growth of the money supply. Other positive influences came from growth in business and consumer credit, changes in business deliveries, changes in sensitive materials prices, increase in stock prices and growth in orders for business plant and equipment.

Five indicators held back the gain in the index. The largest negative factor came from a drop in the formation of new businesses, followed by a decline in orders for consumer goods, a fall in building permits, a decline in the average workweek and a rise in weekly unemployment claims.