Leading economic indicators decline again

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Three declines in a row are often -- though not always -- a sign of coming recession.


An Indication of a Slowdown?

Leading Economic Indicators Decline 0.1 Percent

By Lisa Singhania

The Associated Press

W A S H I N G T O N, Aug. 30  A key measure of U.S. economic activity fell slightly in July for the third time in as many months, the latest sign the economys growth is slowing, an industry group said today.

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 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.

The numbers come barely a week after the Federal Reserve passed on a chance to raise interest rates. The hike would have been the seventh since last summer  all part of an effort to cool down the economy and curb inflationary pressures by putting the brakes on unsustainable growth.

Gauging the Growth Rate

Conflicting data exist on how much the economy has cooled down, however.

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 months Conference Board survey, but a larger percentage of consumers surveyed said they planned to purchase big-ticket items, like cars.

The Leading Indicators report released today also showed that the boards 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 happened, decreased by 0.1 percent to 105.2. The board said the largest contributor to Julys 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.

Copyright 2000 The Associated Press. All rights reserved.

-- (M@rket.trends), August 30, 2000

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