NEW YORK -- The number of new people signing up for jobless benefits dropped last week, and a closely watched gauge of future economic activity rose more than expected in May, suggesting that the US economy can continue a sturdy expansion through the summer.
The Conference Board said its Composite Index of Leading Economic Indicators increased 0.5 percent to 116.5 in May after a 0.1 percent rise in April.
In another sign of a broadening recovery, the Labor Department's producer price index, a measure of prices before goods reach stores, posted the largest increase in more than a year.
While that raised some concerns about inflation, it also indicated that businesses are more confident in the economy's growth and able to raise wholesale prices.
The Labor Department reported yesterday that new applications filed for unemployment insurance fell a seasonally adjusted 15,000, to 336,000, the lowest level since May 8.
The Labor Department said its producer price index rose 0.8 percent in May after a 0.7 percent rise in April. It was the largest increase since a 1.3 percent spike in March 2003.
Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C., said ''it may be the last blast of really large price increases," noting that crude oil prices have come down in recent weeks and that other commodity prices, including lumber, have been softening.
The big question is how the Federal Reserve will read the latest data when it meets at the end of the month to review its interest rate policy.
''The real debate is whether this is a significant increase we're seeing here that has to be met with a more aggressive posture from the Federal Reserve," said Anthony Chan, senior managing director and chief economist at Banc One Investment Advisors in Columbus, Ohio. ''I don't see that in these numbers."
Federal Reserve chairman Alan Greenspan has been sanguine about inflation, too. He told Congress earlier this week that he is not worried that the country is on the brink of a surge in inflation. Any rate increases by the Fed would be at a measured pace unless economic conditions change, he said.
Economists widely expect the Fed to boost short-term interest rates for the first time in four years at its next meeting June 29-30. The Fed's key short-term interest rate is at a 46-year low of 1 percent. Most economists are expecting a 0.25 percentage point increase.
The 0.5 percent rise in the Conference Board's index was larger than the 0.4 percent analysts had expected.
Ken Goldstein, economist for the New York-based business group, noted that the index has risen in 13 of the last 14 months. The latest numbers, he added, ''reflect a robust economic environment this spring and point to more of the same this summer."