Leading economic indicators drop again

Wednesday, August 30th 2000, 12:00 am
By: News On 6

NEW YORK – A key measure of U.S. economic activity fell slightly in July for the third time in as many months, the latest sign the economy's growth is slowing, an industry group said Wednesday.

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Conference Board

The Index of Leading Economic Indicators declined by 0.1 percent in July to 105.8, suggesting a break from rapid economic growth for the rest of 2000, according to the New York-based Conference Board. The news surprised many analysts, who had predicted the index would remain unchanged.

The index, which attempts to forecast economic trends for the next three to six months, stood at 100 in 1996, its base year. Except for a 0.1 percent increase in March, the index has been flat or declining throughout this year.

"It would be difficult to achieve another 5 percent-plus rate of gross domestic product growth with the manufacturing, housing, consumer, labor and finanical markets all indicating a more modest pace of activity. With employment and income still rising, there will be growth, but not at the pace set earlier in the year," said Conference Board Economist Ken Goldstein.

The markets were mixed following release of the report. The Dow Jones industrial average was down 23 points to 11,191 while the Nasdaq Stock Market was up 5 points to 4,087.

The numbers come barely a week after the Federal Reserve passed on a chance to raise interest rates again in its effort to cool the economy and curb inflationary pressures by putting the brakes on unsustainable growth.

Conflicting data exist on how much the economy has cooled.

Two separate reports released Tuesday offered signs consumers are confident about the economy and continue to spend money.

The Commerce Department reported that sales of new single-family homes in July jumped 14.7 percent – the largest increase since April 1993. Many analysts were expecting a much smaller increase of around 1 percent. Meanwhile, consumer confidence levels dipped slightly in this month's Conference Board survey, but a larger percentage of consumers surveyed said they planned to buy big-ticket items, such as cars.

The Leading Indicators report released Wednesday also showed that the board's Index of Coincident Indicators, which gauges current economic activity, was flat in July at 115.6, after rising 0.2 percent in June and 0.3 percent in May. Although industrial production and personal income increased, employees on nonagricultural payrolls decreased in July.

The Index of Lagging Indicators, which reflects changes that have already occurred, decreased by 0.1 percent to 105.2. The board said the largest contributor to July's decline was outstanding commercial and industrial loans, prime rates and changes in labor costs. The index rose 0.6 percent in June and 0.3 percent in May, according to revised data.

The three indexes are used together as a barometer of overall economic trends.