KINGSTON – The Rhode Island economy continued to register some limited signs of recovery in May, University of Rhode Island economist Leonard Lardaro said today, as his index of state economic indicators returned to its highest level in 17 months.

Lardaro’s Current Conditions Index, which uses a dozen economic indicators to track the state’s economic performance, stood at 17 in May, up from readings of 8 in April and 0 in March. (A reading of 0 would mean no indicators improved compared with a year earlier, while 100 would mean all 12 of them improved.)

The Providence Business News/e-forecasting.com index, released last week, also rose in May to 93.6, its first improvement since 2007. A reading of 100 on the PBN/e-forecasting index is equal to the state’s economic activity in 2000.

“The good news is that we continue to progress in the process of recovery,” Lardaro wrote in a note accompanying the report. The index’s performance in May tied with January as its best since December 2007, when it stood at 33 as the as national economy slipped into recession.

Assuming the state economy is not in the midst of a miraculous recovery, Rhode Island’s current recession will enter its third year next month, according to Lardaro. But by his calculations, the current downturn would have to continue past next February to surpass the 31-month recession of 1989-1991.

Two of the 12 indicators showed improvement in May compared with a year earlier. U.S. consumer sentiment rose 14.5 percent from May 2008, while manufacturing wages were up 0.3 percent.

However, the statistic that Lardaro uses to measure U.S. consumer sentiment – the Reuters/University of Michigan consumer sentiment index – fell this month after four months of gains, meaning its improvement may not be sustained.

In addition, Lardaro noted that eight of the 12 indicators rose from April to May, and those monthly gains could “eventually lay the foundation for improvement on a year-over-year basis.”

At the same time, Lardaro warned that the remaining 10 indicators not only failed to improve but in fact managed to post “very discouraging performances” even compared with the already recessionary levels of May 2008.

New single-unit housing permits were 22.2 percent below last May, as “new home construction remained virtually non-existent here,” Lardaro said. Retail sales, manufacturing hours, and jobs in government and employment services all deteriorated.

Benefit exhaustions – which tracks the number of people who have been out of work for so long that they are no longer eligible for unemployment benefits – nearly doubled during the year, in a sign of how distressed the Rhode Island labor market remains. Benefit exhaustions have risen at an annual rate of 38 percent or more for 11 straight months, Lardaro said.

While acknowledging the “discouraging performance” of the state economy compared with a year earlier, Lardaro said that if the indicators continue to show monthly improvements, Rhode Island could begin to experience an economic recovery next spring.

The Current Conditions Index, created by University of Rhode Island economist Leonard Lardaro, measures the strength of the state’s economy. The index – based on 12 key economic indicators related to housing, retail sales, the employment situation and the labor supply – attained its maximum value of 100 points several times in 1984 and 1986. Additional information is available at members.cox.net/lardaro/.