U.S. Economy Recovery slows, leading indicators drop

ADAM GELLER
Canadian Press

Thursday, August 19, 2004

NEW YORK (AP) - Offering more evidence that the U.S. economic recovery is losing steam, a closely watched gauge of future business activity has fallen for the second consecutive month.

The Conference Board said Thursday that its composite index of leading economic indicators dropped by 0.3 per cent in July, following a revised decline of 0.1 per cent in June.

The index is designed to forecast the economy's health over the coming three to six months. Economists said the lower-than-expected reading, together with a mixed batch of other recent data, points to slower growth in the months ahead.

"When the economy is growing at sort of a moderate, modest pace, you'll get indicators pointing in opposing directions, and it seems like that's what we've been seeing in recent months," said Patrick Fearon, an economist with A. G. Edwards & Sons in St. Louis.

"This is all just consistent with growth having slowed to pretty much an average pace."

Ken Goldstein, an economist with the Conference Board, said the "loss of forward momentum" in the leading indicators reflects a host of factors, from energy prices to worries about terrorism.

"There are growing concerns about the high cost of gasoline and milk, as well as worries about where economic growth will come from now that tax refunds have been spent and short-term interest rates are rising," he added.

Also Thursday the Labour Department said the number of Americans filing new claims for unemployment insurance dipped by 3,000 last week to 331,000. It was the third consecutive week of decline, and the four-week moving average of claims, which smooths out fluctuations in the volatile figures, receded to 337,000 from 339,500.

The decline in the leading indicators index means there is less wind in the economy's sails but some of the factors driving down the index are temporary, said Joel Naroff of Naroff Economic Advisors in Holland, Pa.

"There is a little bit of weakness out there, and one month doesn't tell us we've made a turn," he said.

The index of coincident indicators, which measures the current economy, rose 0.1 per cent in July after holding steady in June.

 

 

 

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