The composite index of leading economic indicators rose an expected 0.3% last month and fully recouped a 0.3% decline during April. The May gain was only the second monthly increase this year, according to the Conference Board and left the leaders up just 0.3% y/y.

During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.

The breadth of one month gain amongst the 10 components of the leading index remained at a low 55% after a 30% rise amongst the leaders’ components’ during April.

Lower initial claims for unemployment insurance, higher building permits and higher stock prices accounted for most of the gain in the leading index last month. Capital goods orders and the money supply fell.

The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found here.

The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.

The coincident indicators increased 0.2% after a 0.1% rise during May. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.

The lagging index rose the same 0.2% as during May. As a result the ratio of coincident to lagging indicators (a measure of economic excess) fell during May following a slight decline the prior month.

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