Leading indicators slip 0.1 percent in April

By TALI ARBEL AP Business Writer

NEW YORK (AP) - A private research group's gauge of future U.S. economic activity unexpectedly slipped in April, the first decline in more than a year and a sign that growth could slow this summer, weighing on hiring.

The Conference Board said Thursday its index of leading economic indicators edged down 0.1 percent last month, the first drop since March 2009. Economists polled by Thomson Reuters had expected a gain of 0.2 percent.

The index is designed to forecast economic activity in the next three to six months.

"Slower growth is likely in store for the second half of the year as the boost from inventories fades away," said Tim Quinlan, economist at Wells Fargo Securities, in a research note.

Goldman Sachs economists expect growth to slow to an annualized rate of 1.5 percent in the second half of the year from more than 3 percent in the first six months of 2010.

Factories have ramped up production in the past 12 months as customers restock shelves. Many companies cut their orders for goods during the recession and instead used up their existing stockpiles. Once inventories are restored to normal historical levels, growth in the manufacturing sector will depend on increases in consumer demand.

The recovery has spread more broadly through the U.S. economy this spring, with retailers and other consumer-dependent industries posting stronger first-quarter profits.

But a drop-off in the construction sector following the end of a government tax credit for homebuyers and a debt crisis in Europe may weigh on growth, discouraging employers from hiring.

"Unemployment claims remain too high to be supportive of lasting job growth," Quinlan said.

On Thursday, the government said the number of people filing claims for jobless aid rose last week by the largest amount in three months. Applications for benefits rose 25,000 to 471,000 last week, the first increase in more than a month.

The decline in the indicators in April "suggests a recovery that will continue through summer, although it could lose a little steam," said Ken Goldstein, an economist at the Conference Board.

The research group also revised its March growth estimate to 1.3 percent, slightly less than the 1.4 percent growth it had previously estimated.

Six of the index's 10 components deteriorated in April. The biggest drags on the index: U.S. residents filed fewer applications to build homes, vendors were slower in delivering supplies to companies, the unemployed filed more claims for jobless aid and consumers' confidence dropped.

Four components improved, including higher stock prices, on average; a sharper difference between overnight and 10-year borrowing costs, historically a positive signal; more hours worked in factories and an increase in manufacturers' orders for capital goods.