Thursday, May 17, 2007

Economy May Contract in Coming Months (AP)

NEW YORK - A closely watched gauge of future U.S. economic activity fell in April, nearly reversing the previous month's gain and easing concerns about whether the Federal Reserve would raise interest rates.

The Conference Board said Thursday its index of leading economic indicators dropped 0.5 percent, higher than the 0.1 decline analysts were expecting. The drop follows a revised 0.6 percent climb in March, which came after two months of declines.

The reading is designed to forecast economic activity over the next three to six months. The reading tracks 10 economic indicators. Two of those readings were positive in April: stock prices and real money supply. The negative contributors, beginning with the largest, were building permits, weekly unemployment claims, manufacturers' new orders for non-defense capital goods, consumer expectations, vendor performance, average weekly manufacturing hours and interest rate spread. The 0.5 drop means the cumulative change in the index over the past six months has turned negative.

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