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Index: U.S. Economic Future Slowing

Breast cancer survivor Sheryl Crow
CBS/The Early Show
A key gauge of future economic activity fell in May, suggesting that the Federal Reserve's efforts to put the brakes on economic expansion are working.

The Index of Leading Economic Indicators declined by 0.1 percent, primarily because of a pullback in manufacturing and a decline in stock prices, the Conference Board said Wednesday. The index held steady in April, according to revised figures, after increasing by 0.1 percent in March.

The index, which attempts to forecast economic trends for the next three to six months, stands at 106. It stood at 100 in 1996, its base year.

The decline matched expectations of economists surveyed by CBS.MarketWatch.com.

"The modest pace in the leading index in the recent months clearly indicates some loss of momentum in the pace of economic activity," the board said. The leading index is designed to catch turning points in the economy.

According to Wednesday's report, there still is some strength left in the economy. The Coincident Indicators, which gauge current economic activity, rose 0.2 percent in May, boosted by strength in industrial production and personal income.

The index of lagging indicators also rose, climbing by 0.2 percent. That gain was fueled by changes in outstanding commercial and industrial loans, the prime rate and labor costs.

Together, the three indexes "point to sustained expansion but not at the rapid pace we saw in the beginning of the year," the New York-based Conference Board said.

Three of the 10 components of the leading index rose in May, led by new orders for consumer goods. The interest rate spread and consumer expectations also gained.

"Primarily, it's further confirmation that the economy is moderating," said David Orr, chief economist at First Union Corp. "The brakes are being tapped."

Market participants are waiting for Friday's jobs report for fresher evidence that the economy may have continued to slow in June.

Concerns about too-rapid expansion and fears of inflation have prompted the Fed to raise interest rates six times in the past year. The central bank left rates unchanged at its most recent meeting last week, but left the door open to the possibility of another rate hike at its next meeting on Aug. 22.

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