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Measure of future U.S. economic activity up 0.2%

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By Christopher S. Rugaber
Associated Press
Published:
WASHINGTON -- A measure of the U.S. economy intended to signal future activity rose only slightly last month, suggesting growth could stay weak.
The Conference Board said Wednesday that its index of leading indicators increased 0.2 percent in October after a 0.5 percent gain in September. The index is intended to anticipate economic conditions three to six months out.
The strength in October came from lower interest rates, a drop in applications for unemployment benefits, and an increase in demand for large manufactured goods.
Applications for unemployment aid have spiked this month because superstorm Sandy closed businesses and cut off power to 8 million homes in 10 states. People can claim unemployment benefits if their workplaces are forced to close and they aren't paid.
In all, only four of the 10 indicators that make up the index improved. The major areas of weakness were a decline in building permits, a drop in consumer confidence, a decline in the Institute for Supply Management's new orders index and lower stock prices.
"Based on current trends, the economy will continue to expand modestly through the early months of 2013," Ken Goldstein, an economist at the Conference Board, said.
Many analysts predict growth at an annual rate of roughly 3 percent in the July-September quarter, up from the initial estimate of 2 percent reported last month. The government releases its second estimate for third-quarter growth on Nov. 29.
But many economists expect growth to slow in the current October-December quarter to an annual rate below 2 percent. Part of the slowdown is likely to occur because of Superstorm Sandy, which disrupted businesses and cut off power throughout the Northeast.
Many companies may also hold off on hiring and new investment until the White House and Congress resolve the "fiscal cliff," the package of tax cuts and spending increases scheduled to take effect Jan. 1.
If the cliff is avoided, many analysts think growth could accelerate next year.

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