Thursday, September 02, 1999
Economic index climbs again
BY NOELLE KNOX
The Associated Press
NEW YORK — The longest peacetime economic expansion in U.S. history is likely to continue into early 2000, according to one key gauge, although rising interest rates are beginning to slow sectors such as home building.
The Index of Leading Economic Indicators rose 0.3 percent, to 108.0 in July, the Conference Board reported Wednesday. But construction spending unexpectedly fell 0.5 percent, according to a separate government report.
The mixed signals might take pressure off the Federal Reserve, which already has raised interest rates twice this summer in an attempt to slow the economy's growth to a noninflationary pace.
“The mixed economic news is a sign of slow growth, not a weak economy,” said Gary Thayer, chief economist at A.G. Edwards & Sons. “There's a good possibility the Fed may not raise rates; it's still a mixed call.”
Relieved investors pushed up stocks. The Dow Jones Industrial Average, which had tumbled almost 500 points since setting a record Aug. 25, moved up 107.65 at 10,936.93 in light trading Wednesday. Yields were little changed in the inflation-sensitive market for government bonds.
The July jump in the Index of Leading Economic Indicators, which was slightly better than expected, reinforced Tuesday's economic data that showed the manufacturing economy grew in August.
“The two key drivers of this latest increase were manufacturing and the labor market,” said Ken Goldstein, an economist for the Conference Board, a business-sponsored research group.
There are concerns that rising interest rates could slow growth later this year, he said. “But overall, strength in manufacturing conditions and a robust labor market more than offset the negative contribution of higher interest rates.”
The economic expansion, now in its ninth year, will be the longest in U.S. history if it continues to February. But there are signs of slowing.
Home building and other construction spending fell to a seasonally adjusted annual rate of $695.7 billion in July, the Commerce Department said Wednesday. In June, construction spending fell slightly, according to revised figures.
July's construction spending drop surprised analysts, who had been expecting a slight rise.
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.
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