Thursday, December 30, 1999
Economic index at 40-year high
BY PETER SVENSSON
The Associated Press
NEW YORK — A key indicator of future economic activity rose to a 40-year high in November, propelled by a sizzling stock market and signaling that the economy's expansion will continue well into the new year and into the record books.
The rise in the Index of Leading Economic Indicators is the latest evidence of a robust economy, and analysts said it is likely that the Federal Reserve's inflation-fighters will once more raise interest rates in early 2000.
The Conference Board said Wednesday that the index rose 0.3 percent in November to 108.3. The level is the highest since 1959, the first year the index was calculated in a way that is comparable with current figures.
The leading index is a barometer for the next three to six months.
The greatest factor was the booming stock market, which is one of the indicators because investments are based on expectations of future performance. Five of the other
nine indicators also advanced in November.
November saw the second consecutive rise for the index after a flat reading in August and a slight dip in September, which the Conference Board attributed to the impact of the severe hurricane season.
“The latest readings suggest that there has been no fundamental change in the underlying conditions of the economy over the second half of 1999,” said Ken Goldstein, an economist for the board, a business-financed study group.
“Without more evidence of some underlying weakening in economic fundamentals, this expansion will continue well into 2000, setting a record in February,” Mr. Goldstein said.
The longest U.S. economic expansion lasted for 106 months, from February 1961 until December 1969. The current expansion, which began in March 1991, would match the record if it continues through January.
David Orr, chief economist at First Union Corp. in Charlotte, N.C., said the report was in line with expectations. “There's nothing you can find in here or anywhere else that would keep the economy from expanding at least into February,” he said.
Andrew Groat, an economist at Merrill Lynch, said continued strong economic growth makes it likely that the Fed will increase interest rates in a further attempt to keep the economy from overheating. The Fed raised rates three times this year but put off any further decisions to tighten credit until 2000.
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