U.S. Index of Leading Economic Indicators Falls

The index of U.S. leading indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflects temporary setbacks including auto-plant shutdowns.

The Conference Board’s gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg News survey.

A jump in firings that moved opposite to increased hiring last month indicated unevenness in the labor market. At the same time, Federal Reserve policy makers noted during their April meeting that job prospects “continued to improve gradually” and economic growth will persist at a “moderate pace.”

“We’re probably not going to see the same pace of contraction as the first quarter, but the economy certainly has throttled back a little bit,” said Charmaine Buskas, chief strategist at 4Cast Inc. in New York. “The leading indicators are not only giving back some of the gains that we’ve seen over the last months, but we’re also seeing temporary setbacks, partly as a result of some shutdowns from the auto sector.”

Estimates of 58 economists in the Bloomberg survey ranged from a 0.2 percent decrease to a 2.0 percent increase.

Six of the 10 indicators in the leading index subtracted from the total, led by jobless claims, which took away 0.33 percentage point.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,342.75 at 10:02 a.m., after the report was released. The yield on the benchmark 10-year note, which moves inversely to prices, rose to 3.22 percent from 3.18 late yesterday.

Jobless Claims

In April, the four-week moving average of jobless claims rose four out of the five weeks. The Labor Department attributed the gains to unusual events that seasonal variations failed to take into account, including a spring break holiday in New York, a new emergency benefits program in Oregon and auto-plant shutdowns caused by the disaster in Japan.

A report today showed fewer Americans than forecast filed applications for unemployment benefits last week, adding to evidence that temporary events caused last month’s surge.

Jobless claims declined by 29,000 to 409,000 in the week ended May 14, according to Labor Department figures. Economists in a Bloomberg News survey projected a drop to 420,000.

The gauge of supplier deliveries and the number of building permits also subtracted from the Conference Board index total.

The spread, or difference between the overnight federal funds rate and the yield on the 10-year Treasury note, boosted the index by 0.35 point.

Seven of 10

Seven of the 10 indicators that make up the Conference Board’s leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times.

The Conference Board estimates new orders for consumer goods, bookings for capital goods and the money supply adjusted for inflation.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, rose 0.1 percent after a 0.2 percent gain the prior month.

The coincident index tracks payrolls, incomes, sales and production -- the measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.

The gauge of lagging indicators increased 0.5 percent last month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.

U.S. Economy

The U.S. economy grew less than forecast in the first quarter as government spending declined by the most since 1983 and household purchases cooled. Gross domestic product rose at a 1.8 percent annual rate from January through March after a 3.1 percent pace in the final three months of 2010, the Commerce Department said April 28.

Target, the second-largest U.S. discount retailer, posted a 2.7 percent gain in first-quarter profit that beat analysts’ projections, bolstered by the credit-card business. Still, Chief Executive Officer Gregg Steinhafel said a faster expansion would help boost consumer purchases.

“While the U.S. economy is showing some signs of improvement, we expect the recovery will continue to be slow and uneven, particularly for more moderate-income households,” Steinhafel said May 18 in a call with analysts. Those households “need to see further improvements in housing and income growth before they’ll have the capacity to meaningfully increase the discretionary spending.”

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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