Wells Fargo Reports: Leading Index Climbs Higher in May

The Leading Economic Index (LEI) continued its upward march in May, consistent with our expectations for a continued moderate expansion. The coincident and lagging indices were both modestly higher as well.

Everyone is Lending a Hand

• The LEI increased 0.3 percent in May, marking its ninth consecutive month recording a gain. Eight of the components added to the topline figure, while only one subtracted from it.
• Building permits was the only component that weighed on the index, shaving off 0.15 percentage points from the topline figure. This is consistent with housing starts data for May, in which both single-family and multifamily starts declined.

Expectations Continue to Propel Index Higher

• The interest rate spread component was, once again, the largest contributor to the index in May, adding 0.16 percentage points. Consumer expectations added an additional 0.08 percentage points—sentiment remains optimistic.
• ISM new orders provided a 0.08 percentage point boost to the index, an indication that the gap between “soft” and “hard” data may be narrowing, if only slightly.