Key Economic Indicators Slow
"A gauge of future economic activity rose 0.4 percent in May, signaling slow growth in the U.S. economy lies ahead in the summer and fall," the Associated Press reported Thursday.

The Conference Board's latest leading economic index (LEI), designed to forecast economic activity in the next three to six months, "points to continued, though slower, U.S. growth for the rest of the year," Bart van Ark, the private research group's chief economist, said in a statement.

The LEI for the U.S. has been on an upward trend for more than a year now, yet its six-month growth rate has fallen to 3.9 percent through May 2010, down from 5.2 percent for the previous six months. However, several strong points among the leading indicators have continued in recent months.

In May, five of the 10 indicators that make up the leading index rose, with the largest positive contribution from the interest rate spread. Other positive indicators were the real money supply, average weekly manufacturing hours, the index of consumer expectations and manufacturers' new orders for consumer goods and materials.

"Taken together, the current behavior of the composite indexes suggests that the economy will continue to recover, but the recent rapid expansion is not likely to be sustained in the near term," according to The Conference Board.

Factory Production Up in May
Following a 0.7 percent increase in April, total output for U.S. factories, mines and utilities increased 1.2 percent in May, despite a modest drop of 0.2 percent in mining activity for the month, the U.S. Federal Reserve reported Wednesday.

Much of the May production growth was due to a boost in manufacturing output, which increased 0.9 percent following a 0.9 percent gain in April and a 1.2 percent increase in March. Manufacturing output was 7.9 percent above its prior-year level, while utilities production climbed 4.8 percent in May thanks to unusually warm temperatures that boosted air conditioner usage.

"Fifteen of the 20 major manufacturing industries experienced growth last month," Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, wrote in an analysis of the Fed report. "Furthermore, many of the industries that posted the strongest gains were some of those severely hurt by the recession that ended in June 2009, for example, steel, motor vehicles, wood products, and machinery industries."

Total industrial output in May was 103.5 percent of its 2002 average and 7.6 percent above its year-ago level. Capacity utilization for the industrial sector rose 1 percentage point to reach 74.7 percent, 6.2 points above the May 2009 rate but still 5.9 points below the average from 1972 to 2009.

For more on this report, see U.S. Industrial Production Rises in May.

Initial Jobless Claims Jump
The number of people filing new claims for unemployment insurance jumped by 12,000 to a total of 472,000 in the week ended June 12 — the highest level in a month — the U.S. Department of Labor reported on Thursday.

"First-time jobless claims have hovered near 450,000 since the beginning of the year after falling steadily in the second half of 2009," the Associated Press said. "That has raised concerns that hiring is lackluster and could slow the recovery."

The previous week's initial claims were revised upward by 4,000 to 460,000, as more complete data were collected.

"The jobless claims report shows that the level of layoffs, while down from the peak a year ago, is too high to be consistent with robust job growth," MarketWatch noted. "The economy is creating jobs, but too few to bring the unemployment rate down meaningfully."

Meanwhile, the four-week average for unemployment claims, which smooths volatility in the data, was essentially flat, falling by approximately 500 people to 463,500. That's down 3,750 from the start of January.

World Auto Sales Forecast to Rise in 2010
Worldwide auto sales are expected to increase by approximately 7 percent this year, rising to a total of 68 million vehicles despite a 10 percent sales drop in Europe, according to a report from business consulting firm AlixPartners last week.

The study found that the auto industry currently has a profitability rate of 6 percent, down significantly from the 8.5 percent to 9.5 percent average between 1995 and 2000. However, today's 6 percent return is being earned from annualized sales of only 12 million units, meaning that if the industry rebounds to 15 million units, average profits may match or exceed late-1990s levels.

"The good news is restructurings worked, both for automakers and suppliers," John Hoffecker, a managing director at AlixPartners, said in an announcement of the findings. "As a result, many companies today are enjoying profitability levels that seemed impossible a year ago and are now shifting into growth mode."

In the first five months of 2010, vehicle sales rose to 4.6 million units, up 17 percent from the same period in 2009, according to automotive research firm Autodata. But retail sales have remained at comparatively low levels, as increased commercial buying has temporarily boosted overall industry sales.

"The increase in auto sales in the first five months of 2010 has been driven by higher sales to rental-car companies and other commercial fleets — not sales to consumers, who are now showing signs of more pessimism about the economy, as well as a halting interest in buying new cars," the Wall Street Journal explained.