Economic Index Shows Solid Gains in June

An important gauge of future economic activity rose strongly in June and jobless benefit claims dropped last week by the greatest amount in more than two years, suggesting that the U.S. economy was continuing to grow.

But many analysts believe the expansion has begun slowing from last year’s torrid pace in response to Federal Reserve hikes in U.S. interest rates.

The New York-based Conference Board said Thursday that its composite index of leading economic indicators increased 0.9% in June to 137.7 after showing no change the month before and a 0.2% rise in April.

The June increase was the largest since a 0.9% rise in December 2003, the board said.

The index is watched closely because it is designed to predict economic activity over the next three to six months.

In Washington, meanwhile, the Labor Department reported that the number of Americans filing new claims for unemployment benefits plunged last week by the largest amount in 2 1/2 years. The department said new benefit claims dropped 34,000 to a total of 303,000 as the labor market continued to strengthen.

Government analysts attributed the improvement to a slowdown in layoffs in the auto industry, which had seen big increases in recent weeks as auto plants shut down temporarily to retool for the new model year.

The drop of 34,000 was the largest one-week improvement since a decline of 35,000 in the week of Dec. 21, 2002.

Economists said the latest statistics showed that the economic expansion was continuing, although probably at a slower rate than last year.

Anthony Chan, managing director and senior economist at JPMorgan Fleming Asset Management in Columbus, Ohio, said the leading index performance in June was solid, with broad-based gains in most of its 10 components, including consumer sentiment.

At the same time, he said, the economy’s growth rate appears to be slowing from the 4.4% level in 2004. He predicted that the economy would grow 3.5% this year and 3.25% in 2006.

The leading index figures were based on revised calculations. The last time the gauge underwent a major revision was in 1996, shortly after the Conference Board, an industry-backed research group, took over calculating the index from the Commerce Department.

Without the revisions, the index of leading indicators would have shown an increase of 0.5% in June after a dip of 0.2% in May, the Conference Board said.

The board said the revised index had increased at a 1.2% annual rate over the last six months, down from a peak of about 10% at the end of 2003.