Index of Leading Economic Indicators Gains

Wednesday, September 1st 1999, 12:00 am
By: News On 6

NEW YORK (AP) -- In another sign the U.S. economy continues to
grow at a brisk pace, a key barometer of future activity rose 0.3
percent in July.
The Index of Leading Economic Indicators registered gains in
nine of the last 10 months. The July results were reported today by
the business research group called the Conference Board.
There are concerns that rising interest rates could slow growth
later this year, said Ken Goldstein, an economist for the group.
"But overall, strength in manufacturing conditions and a robust
labor market more than offset the negative contribution of higher
interest rates," he said.
"Eight of the 10 leading indicators posted increases,
underscoring the continuing strength of the current economic
expansion," Goldstein said. "The two key drivers of this latest
increase were manufacturing and the labor market."
The results for July, which were slightly better than expected,
reinforce Tuesday's economic data that showed the manufacturing
economy grew in August.
However, the economic expansion, now in its ninth year, is
showing some signs of cooling, including a separate report today on
a decline in construction spending.
With mixed inflation signals, stocks rose modestly this morning
and the inflation-sensitive bond market held steady.
Home building and other construction spending was surprisingly
weak in July, according to a report today from the Commerce
Department in Washington.
Construction spending fell unexpectedly in July, declining 0.5
percent. Spending fell to a seasonally adjusted annual rate of
$695.7 billion. In June, construction spending fell slightly,
according to revised figures.
July's construction spending decrease was worse than the
expectations of many analysts, who forecast that spending would go
up between 0.3 percent and 0.6 percent.
Home building and other construction activity -- driven by low
mortgage rates -- were a key contributing factor to the strong
economic growth in the early part of the year.
But the Federal Reserve has raised key interest rates twice this
summer, and that makes buying a home more expensive.
Rising mortgage rates took a bite out of the housing market in
July. Existing-home sales fell 3.9 percent, while sales of new
homes rose a slight 0.1 percent but still reached the
second-highest level ever.
Consumers are feeling a little less confident about the future
economic and job prospects, in part because of the rise in interest
rates. The Consumer Confidence Index fell for a second straight
month in August, according to a Conference Board report Tuesday.
The leading indicators are calculated from a base of 100, set in
1992. First calculated in the late 1960s, it is periodically
fine-tuned and figures from past years are revised.