Forecasting Index Points to Slower Growth
An important gauge of future economic activity slipped in April, suggesting slower growth in the months ahead.
The Conference Board, a private research group, reported Thursday that its index of leading economic indicators fell 0.1% to 138.9 last month. Economists had predicted a small rise. The index had climbed 0.4% to 139 in March.
The index is closely watched because it predicts economic activity three to six months ahead.
Economists said the slide reinforced the Federal Reserve’s forecast that economic growth, which has been brisk, would probably moderate to a more sustainable pace in the coming months.
The economy in the first quarter of 2006 grew at a 4.8% pace, the fastest in 2 1/2 years. Analysts expect growth to slow to a pace of 3% to 3.5% in the second and third quarters, which would still be healthy.
April’s index reading was weighed down by, among other things, a drop in building permits, a decline in consumer expectations and a rise in filings for unemployment benefits.
Also Thursday, an indicator of business activity in the Middle Atlantic region showed weak employment with accelerated inflation.
The headline figure in the Philadelphia Federal Reserve’s business activity index rose modestly and unexpectedly in May from April. But markets quickly focused on the survey’s weak reading on employment and strong gain in a component indicating inflation pressures.
St. Louis Fed President William Poole said Thursday that expectations in financial markets for the course of U.S. interest rates appeared on track.
He stressed, however, that he had drawn no conclusions about what the central bank will do with rates at its June meeting and that the road ahead would depend on incoming information, not forecasts.
In a separate report, the Labor Department said the number of people signing up for jobless benefits rose sharply last week mainly because of the lingering effects of a partial government shutdown in Puerto Rico.
Applications for unemployment insurance rose by a seasonally adjusted 42,000 to 367,000 for the week ended Saturday, highest since early October.
