Indicators point to economic slowdown

Associated Press

NEW YORK — For the fourth consecutive month, a key measure of U.S. economic activity fell slightly, the latest sign that economic growth is continuing to slow, an industry group said Tuesday.

The Index of Leading Economic Indicators declined by 0.1 percent in August to 105.7, according to the New York-based Conference Board. The index’s decline met Wall Street analysts’ predictions.

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 flat pace in the leading indicators points to continued moderations in U.S. economic activity," said Conference Board economist Ken Goldstein. "This is reflected in indicators for manufacturing, housing, consumer, labor and financial markets."

Six of the index’s 10 indicators — including average workweek production, vendor performance, index rate spread and consumer expectations — fell in August.

Also on Tuesday, warning that inflationary pressures still exist in the economy, the Federal Reserve decided to leave interest rates unchanged and the Commerce Department said new-home sales fell 3 percent in August, despite cheaper mortgage rates.

Americans purchased new single-family homes at a seasonally adjusted annual rate of 893,000 in August. The decrease was smaller than the 5.8 percent decline many analysts were expecting.

In July, new-home sales shot up 11.8 percent, according to revised figures, not as strong as the 14.7 percent increase the government reported one month ago.

In the past, three declines in a row in the leading indicators index has signaled the U.S. economy could be headed into a recession in the next three to six months.

Economist Paul Christopher said the slowdown is natural in a rapidly growing economy.

"That is a sign that the economy is not really pausing for a breath," said Christopher of A.G. Edwards &amp Sons Inc. in St. Louis. "It is going to be a good healthy slowdown."

Economists generally believe that an economic growth rate of 3.5 percent to 4 percent is what Federal Reserve Chairman Alan Greenspan perceives is ideal for a healthy economy.

The economy is still showing strength in many areas: Among the index indicators that rose in August were money supply and manufacturers’ new orders.

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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