U.S. LEADING ECONOMIC INDICATORS FALL

[Anonymous]

Leading economic indicators fall
Dollar, energy prices contribute to decline

NEW YORK – A
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
months.

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
said.

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
December.

[Author]

February 19, 2005 at 10:30 AM