Thursday, July 06, 2000
Indicators signal slightly slower growth
Manufacturing, stocks drop index 0.1%
The Associated Press
NEW YORK — An important measure of future economic activity fell slightly in May, the latest indication that a succession of interest-rate increases has slowed the U.S. economy.
The Index of Leading Economic Indicators declined by 0.1 percent, primarily because of a pullback in manufacturing and a decline in stock prices, the Conference Board said Wednesday. The index held steady in April, according to revised figures, after increasing by 0.1 percent in March.
The index, which attempts to forecast economic trends for the next three to six months, stands at 106. It stood at 100 in 1996, its base year.
“The bottom line is that the economy is still growing. It's not as fast as it was, but it's still growing,” said Ken Goldstein, an economist for the private industry group.
The report, slightly above analysts' expectations, was the latest in a series of economic data to suggest that the economy, while still growing, is slowing.
“Primarily, it's further confirmation that the economy is moderating,” said David Orr, chief economist at First Union Corp. “The brakes are being tapped.”
Concerns about too-rapid expansion and fears of inflation have prompted the Fed to raise interest rates six times in the past year. The central bank left rates unchanged at its most recent meeting last week, but left the door open to the possibil ity of another rate increase at its next meeting Aug. 22.
Employment figures are due out Friday, and economists say those numbers, along with inflation indexes, could shed light on what the Fed's next move may be.
“At this point, it's not really a question of if the economy is slowing down. We've seen enough that indeed it is happening,” said Kathleen Stephansen, senior economist at Donaldson, Lufkin & Jenrette Securities Corp. “The question is whether the Fed has achieved a balance between price stability and sustaining growth. ... If the Fed is not completely comfortable, it could raise rates.”
Mr. Goldstein said that key economic indicators during the past two years have dropped during spring, only to rebound in the summer.
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