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 user 2005-02-19 at 10:31:00 am Views: 53
  • #10380

    Leading economic indicators fall
    Dollar, energy prices contribute to decline

    closely watched gauge of future U.S. economic activity slipped 0.3 percent in
    January, slightly more than expected, indicating possible weakness in the
    economy in coming months.

    The Conference
    Board, a private research group, said Thursday that its Index of Leading
    Economic Indicators declined to 115.6 last month after rising a revised 0.3
    percent to 115.9 in December and 0.3 percent to 115.5 in November. Before the
    November and December increases, the index had been down for five consecutive
    months, though the declines were modest.

    Analysts had
    expected a drop of 0.2 percent in January.

    The index is
    designed to predict economic activity over the next three to six

    Ken Goldstein, a
    Conference Board economist, said in a statement accompanying the report that the
    economic picture “is positive, but more spotty than robust.”

    He added: “The
    spike in energy prices and the lower dollar took some steam out of the economy.
    But the larger concern remains cautious attitudes. Business concerns about the
    direction of cash flow could lead to cautious decisions about hiring and
    rebuilding inventories.”

    In Washington,
    meanwhile, the Labor Department reported that the number of laid-off workers
    filing new claims for unemployment benefits fell for a third straight week,
    dropping to the lowest level in more than four years.

    A total of 302,000
    Americans filed applications for jobless benefits last week, down 2,000 from the
    previous week on a seasonally adjusted basis, the department said. The level was
    the lowest since Oct. 28, 2000, in the closing months of the country’s record
    10-year long economic expansion.

    The decline in
    jobless claims caught analysts by surprise. They had been forecasting an
    increase of around 12,000.

    In a second report,
    the Labor Department said that prices for imported goods rose 0.9 percent in
    January as foreign petroleum prices jumped 4.6 percent and the price of
    non-petroleum imports edged up 0.2 percent. Import prices are expected to
    continue rising this year as the weaker dollar makes foreign products more
    expensive for American consumers.

    Scott Anderson,
    senior economist at Wells Fargo & Co., which is based in San Francisco, said
    that the index of leading indicators was being brought down, in part, by the
    narrow spread between long-and short-term rates, which in the past has signaled
    an economic slowdown.

    He noted, however,
    that the Fed’s Greenspan said Wednesday that he believes the flattening yield
    curve may be more a reflection of lower long-term inflation expectations, which
    is a plus for the economy.

    “That means there’s
    the possibility some false signals from that (yield curve) measure are passing
    through the economic indicators” and depressing the numbers, Anderson

    He said that Wells
    recently raised its projection for first-quarter economic growth to an annual
    rate of 4 percent, up from an earlier estimate of 3.6 percent, because of strong
    retail sales and good performance in the housing industry.

    The Conference
    Board said that five of the 10 indicators that make up the leading index
    contributed to January’s decline — vendor performance, consumer expectations,
    stock prices, the interest-rate spread, and manufacturers’ new orders for
    consumer goods and materials. Four were up — average weekly manufacturing hours,
    the money supply, building permits, and new orders for nondefense capital goods.
    Claims for unemployment insurance were unchanged.

    The coincident
    index, which reflects current economic activity, was unchanged at 119.6 in
    January after rising 1.1 percent in December.

    The lagging index
    was up 0.3 percent to 98.6 in January after a drop of 0.7 percent in