Economic Indicators Post Big Gain in April

The Conference Board's Index of Leading Economic Indicators posted its first increase in seven months in April and its biggest gain since November 2005, in one of the most hopeful signs to date that the economy may finally be bottoming out.

The Index, widely regarded as indicative of the beginning and end of economic recessions, increased a full percentage point in April, exceeding analysts' expectations of a 0.8 percent increase. That follows decreases of 0.2 percent in March and 0.5 percent in February.

Seven of the 10 indicators making up the index rose in April, the first time that strengths outnumbered weaknesses in a year and a half. Positive contributors, beginning with the strongest, included stock prices, the interest rate spread, the index of consumer expectations and declining new weekly unemployment claims. Negative factors were real money supply, building permits and manufacturer's orders for nondefense capital goods.

Not an upturn yet

Analysts said the upturn doesn't mean the economy is necessarily improving yet, but is just not deteriorating as rapidly.

"The leading indicators suggest that while the recession will continue in the near term, the declines will be less intense," said Ken Goldstein, a Conference Board economist. "The question is how long before declines in activity give way to small increases. If the indicators continue on the current track, that point might be reached in the second half of the year."

The announcement came the day after the Federal Reserve announced that it expects the U.S. economy to decline more than expected this year and that it may need to take additional steps to boost credit and stimulate the economy, Even so, the policymakers said the worst of the crises appears to be over and that they expect the economy to begin to recover slowly next year.

The Fed is predicting an overall decline in the U.S. economy of 1.3-2.0 percent for the year, following huge drops of 6.1 percent and 6.3 percent in the first quarter of 2009 and last quarter of 2008, respectively.

Good and bad news on unemployment

The overall economic picture remains one in which analysts look for signs of changes in momentum, rather than actual improvements. For example, one of the positive factors in April's Leading Economic Indicators was declines in new unemployment filings during the month. That trend continued for the week ending May 15, with new filings dropping by 12,000 to 631,000. However, the total number of persons collecting unemployment benefits rose to 6.66 million, setting an all-time record - for the 16th week in a row.

Since unemployment is typically one of the last things to turn around in a recession, many analysts believe it will be a year or more before new filings drop below hirings and the unemployment level actually begins to recede.

The Conference Board is a nonprofit global business organization that conducts business management research. It is best known for its Index of Leading Economic Indicators, whose fluctuations frequently, but not always, precede a change in the direction of the economy.