U.S. Economy: Leading Indicators Drop in Sign Recovery to Cool

By Bob Willis

May 20 (Bloomberg) -- The index of U.S. leading economic indicators unexpectedly declined in April, a sign the economic expansion may cool in the second half of the year.

The 0.1 percent decrease in the New York-based Conference Board’s measure of the outlook for three to six months marked the first drop in a year and followed a revised 1.3 percent gain in March. Other reports showed more Americans filed for jobless benefits and manufacturing in the Philadelphia region expanded.

The initial factory-induced rebound from the worst recession since the 1930s, which is broadening to include advances in consumer spending and service industries, still faces hurdles. A slump in building permits, little letup in firings and retreating stock prices highlight risks to the strength of the recovery as concern over the European debt crisis mounts.

“It is unlikely that the U.S. economy can shrug off the troubling developments in the euro zone,” said John Herrmann, senior macro strategist at State Street Global Markets in Boston, who correctly forecast the drop. “The manufacturing rebound may be cooling a little bit from the torrid pace we’ve seen. There may also be disappointments on the retail side.” Read more