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Wednesday, Sep. 2, 1998
Economic gauge dispels fears of nearing recession
Leading indicators index reverses 2 months of declines
By SALLY JACOBSEN
Associated PressNEW YORK - A key gauge of future economic activity, which had been hinting at a recession in the months ahead, rebounded in July. But the manufacturing sector remained in the doldrums last month.
Three reports, including one showing construction spending reaching a record high in July, on Tuesday painted a picture of an economy that continues to grow slowly after its sizzling pace early in the year.
``We are barely going to avoid a recession, but perhaps not much more than that,'' said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis.
On Wall Street, the Dow Jones industrial average surged after a massive selloff on Monday that more than erased all of this year's gains. The Dow, down nearly 1,000 points in the past three sessions, shot up 288.36 to close at 7,827.43 in heavy trading.
The Conference Board, a private research group, reported its Index of Leading Economic Indicators gained 0.4 percent in July, reversing two months of declines, which had raised the specter of a downturn ahead.
The index advanced to 105.4 in July, well ahead of economists' expectations.
``There is little risk of recession in the near term,'' the board said in a statement.
Separately, the National Association of Purchasing Management reported its index of business activity rose slightly in August, but not enough to indicate the manufacturing sector is expanding. The reading stood at 49.4 percent, marking the third straight month the measure was under 50 percent, a sign of contraction in the industrial sector.
The overall economy, meanwhile, grew for the 88th month in a row, according to the survey of corporate purchasing executives nationwide. The indicator is usually the first showing how the economy performed in the previous month.
In the third report, the Commerce Department said construction spending advanced 0.4 percent in July to a record high.
A jump in residential building more than offset commercial declines and essentially flat government outlays. Total construction spending amounted to a seasonally adjusted annual rate of $650.4 billion.
Demand for new homes has been strong this year as abundant jobs have boosted families' incomes. Construction spending is also being fueled by low interest rates and competition among banks eager to finance real estate investment.
Overall, the reports show that ``the rate of (economic) growth is slowing down,'' said Cynthia Latta, economist at Standard & Poor's DRI in Lexington, Mass. But, she said, ``we still see a pretty darn healthy economy here.''
The Conference Board's leading indicators slipped 0.1 percent in May and 0.2 percent in June, the first back-to-back drops since a string of five declines in January through May of 1995.
The slides were driven partly by the United Auto Workers' lengthy strikes against General Motors, which have since been settled.
The leading index, which operates from a base of 100 set in 1992, is designed to forecast economic activity six to nine months in advance.
The board's index of coincident indicators for July, which looks at the economy's current condition, held steady. The lagging indicators index, which looks at the past, decreased 0.1 percent.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web