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Index of leading economic indicators rises 0.8%, higher than expected

The U.S. economy is likely to grow in a “choppy” manner through the summer and autumn, the Conference Board said Friday as it reported that its index of leading economic indicators rose a surprisingly strong 0.8% in May.

The reading for May came in ahead of expectations, following a downwardly revised drop in April of 0.4% from the initially reported 0.3% drop. Economists polled by MarketWatch had forecast a 0.5% improvement in May.

The largest contributions to the index, which is composed of 10 weighted indicators, came from the interest-rate spread, consumer expectations and housing permits, more than offsetting the negative contribution from supplier deliveries.

Economists at Wells Fargo & Co. called the increase “incongruous” given other “lousy” reports of late, but said it was an indicator worth examining.

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“Despite a few changes in methodology and the occasional false signal, markets still pay attention to the LEI because over time it has a fairly decent track record of indicating the direction of the overall economy,” they said in a note to clients.

“Modest economic growth is being buffeted by some strong head winds, including high gas and food prices and a soft housing market,” said Ken Goldstein, an economist at the Conference Board.

“The economy will likely continue to grow through the summer and fall; however, it will be choppy.”

A separate measure of current economic activity said there was a 2.4% annual rate of growth in May.

Goldstein writes for MarketWatch.com/McClatchy.


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