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Archive for Tuesday, October 22, 2002

Stock market pulls down leading economic indicators

October 22, 2002

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— A key measure of future economic activity dropped in September, dragged down by the stock market. It was the fourth straight monthly decline in the index, and raised again the prospect of a "double dip" into recession for the U.S. economy.

The Conference Board reported Monday that its Index of Leading Economic Indicators fell 0.2 percent, matching Wall Street expectations.

However, the board's index of current economic activity held steady.

"A stalling out of growth is a more reasonable prospect than the economy falling back into recession," said Conference Board economist Ken Goldstein. "Except for the financial markets, there is little evidence of a developing economic decline."

The leading index, which attempts to predict the strength of the economy about six months ahead, stood at 111.6 in September. It stood at 100 in 1996, its base year.

Aside from the decline in the stock market, the index was dragged down by increasing unemployment claims and declining orders for capital goods.

The index that measures the current economy held at 115.1, buoyed by small gains in personal incomes and sales.

Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis, said the decline in the leading index "at this point just signals that the economy is cooling off, going into the end of the year, but the risk of a double dip is still remote."

He noted that the leading indicators for July and August were revised upward. The Conference Board had said the index declined 0.4 percent and 0.2 percent in those months, respectively, but Monday revised those numbers to declines of 0.2 percent and 0.1 percent based on updated data.

"We're in a volatile period, but the underlying economy is still doing better than it was a year ago," Thayer said.

The economy shrank for the first three quarters of last year, meeting the measure of a recession, which is at least two straight quarters of decline.

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