Main Economic Gauge of Future Plunges 0.6%

Associated Press

The government’s main gauge of future economic activity plunged a sharp 0.6% in January, the first decline in nine months, the Commerce Department said today.

The steep plunge in the index of leading economic indicators does not seem likely to raise fears of an impending recession, however, because a variety of other business barometers are pointing to stronger growth in the months ahead.

Commerce analysts attributed virtually all of the decline to a huge swing in factory orders between December and January.

In December, a big rise in orders for commercial aircraft helped push the index up by 1.5%. But a weakness in orders the next month accounted for nearly all the decline in the January index, the department said.


Private analysts cautioned that not too much should be read into the January index, since it did not reflect one of the key positive events occurring at the present time--a huge fall in oil prices.

“Most of what has happened lately in terms of lower interest rates and lower oil prices suggest more growth in the second half of the year, not less,” said Allen Sinai, chief economist for Shearson Lehman Brothers. “The drop in the index is an isolated event and not indicative of any trend toward a softer economy later in the year.”

The sharp 0.6% January decline in the leading index was the first drop since a 0.7% drop last April. In the last 13 months, the index has risen all but two months, giving many analysts hope that 1986 economic activity will be substantially above last year’s.

The biggest negative factor pulling the index down in January was a weakness in factory orders for plant and equipment, the category that contains the commercial aircraft orders.