A gauge of U.S. economic activity has taken its first drop since September, but this isn’t cause for alarm.

The private research firm The Conference Board on Monday reported its index of leading economic indicators fell 0.4% in April, the first decline since September, when it fell 0.6%.
Five of the 10 indicators that make up the leading index decreased in April: real money supply, stock prices, index of consumer expectations, average weekly initial claims for unemployment insurance and interest rate spread. The three positive contributors to the index were: vendor performance, building permits, and manufacturers' new orders for non-defense capital goods. Average weekly manufacturing hours and manufacturers' new orders for consumer goods and materials held steady in April.
“The sudden sharp drop in the April leading index was caused by two temporary factors that have already returned to normal,” says Newport Communications Senior Economist Jim Haughey.
“New claims for unemployment insurance soared more than 20% in early April when Congress permitted 13 additional weeks of benefits in high unemployment states. People who had exhausted their normal benefits reapplied for extended benefits. Inflation surged due to higher crude oil prices. Higher inflation reduces the real supply of money,” he says.
Haughey says two companion indicators continued to show economic recovery.
“The coincident index that measures current economic activity rose 0.2% and the lagging index that measures cost pressures fell 0.4%, which typically declines at the beginning of an expansion.”
The leading index now stands at 111.7. Based on revised data, this index increased 0.1% in March and held steady in February. During the six-month span through April, the leading index increased 2.2 percent, with nine of the 10 components advancing.