The Conference Board Leading Economic Index® (LEI) for the Euro Area declined 0.5 percent and The Conference Board Coincident Economic Index® (CEI) increased 0.1 percent in May.

The Conference Board LEI for the Euro Area declined for the first time in more than a year in May. Stock prices, the Markit Purchasing Managers’ Index (manufacturing) and the Economic Sentiment Index made the largest negative contributions to the index this month, more than offsetting the continued large positive contribution from the yield spread. Between November 2009 and May 2010, the leading economic index increased by 3.8 percent (about a 7.7 percent annual rate), slower than the 6.6 percent increase (about a 13.5 percent annual rate) between May and November 2009. In addition, the strengths among the leading indicators have become less widespread in recent months.

The Conference Board CEI for the Euro Area, a measure of current economic activity, increased in May for the sixth time in the last seven months, according to preliminary estimates. Between November 2009 and May 2010, the coincident economic index increased by 0.6 percent (about a 1.2 percent annual rate), after decreasing by 0.1 percent (about a -0.2 percent annual rate) during the previous six months. In addition, the strengths among the coincident indicators have become widespread in recent months. At the same time, real GDP grew at a 0.8 percent annual rate during the first quarter of 2010, following an increase of 0.5 percent annual rate (revised) in the previous quarter.

The Conference Board LEI for the Euro Area had been increasing for more than a year prior to this month’s decline, but its six-month growth rate has slowed from the rapid pace in the second half of 2009. Meanwhile, The Conference Board CEI for the Euro Area has increased modestly since October 2009. Despite this month’s fall in the LEI, the recent behavior of the composite indexes suggests that the moderate improvement in economic activity should continue in the near term.

LEADING INDICATORS.

Three of the eight components in The Conference Board LEI for the Euro Area increased in May. The positive contributors - in order from the largest positive contributor to the smallest - are the interest rate spread, real money supply and new orders of capital goods. Negative contributors - in order from largest to smallest - are the EURO STOXX® Index, the Markit Purchasing Managers' Index (manufacturing), the Economic Sentiment Index, the Markit business expectations index (services) and residential building permits.

With the 0.5 percent decrease in May, The Conference Board LEI for the Euro Area now stands at 109.7 (2004=100). Based on revised data, this index increased 0.8 percent in April and increased 1.2 percent in March. During the six-month span through May, the index increased 3.8 percent, with four of the eight components increasing (diffusion index, six-month span equals 56.3 percent).

COINCIDENT INDICATORS.

Two of the four components that make up The Conference Board CEI for the Euro Area increased in May. The positive contributors were retail trade and manufacturing turnover. Employment and industrial production remained unchanged in May.

With the 0.1 percent increase in May, The Conference Board CEI for the Euro Area now stands at 102.3 (2004=100). Based on revised data, this index decreased 0.2 percent in April and increased 0.3 percent in March. During the six-month period through May, the index increased 0.6 percent, with three of the four components increasing (diffusion index, six-month span equals 87.5 percent).