An important U.S. economic measure rose a full percentage point in May, surpassing expectations and leading experts to believe that the U.S. economy is beginning a sustained recovery.
The Composite Index of Leading Economic Indicators measures 10 separate economic factors including stock prices, consumer expectations, and unemployment claims. The May Index stands at 111.6, a full one percent higher than in April. Economist Ataman Ozyildirim says the increase, which exceeded expectations by almost half of one percentage point, is cause for optimism.
"This is the largest increase since December of 2001, and it comes at the end of a long period, about a year, where the leading index was flat," said Mr. Ozyildirim, who is with the Conference Board, the private business research group that compiles the Index. "So, we think it may be the beginning of an upward trend in the index."
Mr. Ozyildirim says the new increase caps six months of slight increases, and that the strength in the index is becoming more widespread, a greater number of its 10 distinct components than usual inched higher.
But he says another of the Conference Board's measuring sticks, the Consumer Confidence Index will determine if the upward trend has staying power.
"Consumer expectations could go back down again, affecting consumer spending, which has been really holding up the economy. Many people are still waiting for business investment to pick up," he said.
The Consumer Confidence Index measures both consumers' future expectations and their assessment of current conditions. It recently recovered sharply after hitting 10-year lows earlier this year.