Growth May Pick Up by End of the Year

The index of U.S. leading indicatorsrose more than forecast in May after declining for the firsttime in almost a year, a sign economic growth may pick up by theend of 2011.

The Conference Board’s gauge of the outlook for the nextthree to six months rose 0.8 percent after a revised 0.4 percentdrop in April, the New York-based research group said today.Another report showed consumer sentiment dropped more thanforecast in June.

Declining fuel costs and an easing of supply bottlenecksstemming from the earthquake in Japan may help strengthenconsumer spending and manufacturing in the third quarter. Thereports bear out Federal Reserve forecasts that the slowdown ingrowth will prove temporary as commodity prices retreat.

“The outlook is better for the second half,” said Maury Harris, chief economist at UBS Securities LLC in New York.“We’re getting relief from gas prices, and you’re also going tosee auto output go back up again as we get a renewed inflow ofauto parts from Japan.”

Stocks rose, spurred by signs of progress on a bailout forGreece and the gain in the leading index. The Standard & Poor’s500 Index rose 0.7 percent to 1,276.17 at 11:51 a.m. in NewYork. Treasury securities were little changed.

Economists forecast the leading index would rise 0.3percent, according to the median of 51 estimates in a BloombergNews survey. Projections ranged from a decline of 0.4 percent toan increase of 0.7 percent.

Broad-Based Gain

Eight of the 10 components of the leading index contributedto the gain, led by the positive spread between short-and long-term interest rates, an increase in consumer expectations and ajump in building permits. A decline in supplier deliveries heldback the advance.

Consumers’ outlook may not contribute this month. TheThomson Reuters/University of Michigan preliminary index ofconsumer sentiment decreased to 71.8 from 74.3 in May, the groupsaid today. Economists forecast a reading of 74, according tothe median estimate in a Bloomberg survey.

Consumer expectations for six months from now dropped to66.8 from 69.5, the report showed. The decrease echoed thechange in the Bloomberg gauge of consumers’ outlook releasedyesterday, which fell to the lowest level since March 2009. Thatreport showed the outlook deteriorated most among householdsmaking from $15,000 to $40,000 a year and among older Americans.

The Michigan survey’s current conditions gauge decreased to79.6, the lowest since October, from 81.9 the prior month.

Job Concerns

“Things have cooled off after better growth earlier in theyear, and people are still worried about the labor market,housing and high gasoline prices,” said Scott Brown, chiefeconomist at Raymond James & Associates Inc. in St. Petersburg,Florida, who forecast the headline sentiment gauge would drop to72. “If we get another break in gasoline prices, that will bevery helpful for the consumer.”

That help may already be on the way. After reaching analmost three-year high of $3.99 a gallon on May 4, the averageprice of regular gasoline at the pump dropped to $3.68yesterday, according to data from AAA, the largest auto group inthe U.S.

Fed Chairman Ben S. Bernanke’s last week predicted theeconomy will pick up in the second half of the year as energyprices moderate and factory disruptions ease as suppliers ofparts from Japan recover. At the same time, he said the centralbank should maintain record stimulus to bolster a “frustratinglyslow” recovery. Officials are scheduled to meet in Washington onJune 21-22 to determine the course of policy.

Supply Disruptions

Supply-chain disruptions from Japan’s earthquake andtsunami in March are being resolved.

Honda Motor Co., Japan’s third-largest carmaker, said itsNorth American vehicle production will return to normal inAugust for all models except Civics as parts suppliers recover.

“The light at the end of the tunnel is glowing brighterfor us, represented by this significant improvement in ourproduction situation,” John Mendel, executive vice president ofU.S. sales, said in a statement May 26.

Another report today showed why consumers remainedconcerned about jobs. Payrolls dropped in 27 states in May,indicating the weakening in employment was broad-based.California led the nation with a 29,200 decrease followed by NewYork with 24,700 fewer jobs, figures from the Labor Departmentshowed. The jobless rate fell in 24 states and rose in 13.