Key Economic Index Drops and May Fall Further

A lengthy string of increases in the government’s main economic forecasting gauge was broken by a 0.1% decline in September as economists warned that Wall Street’s troubles will lead to even sharper drops in the months ahead.

The Commerce Department reported Friday that its index of leading indicators, after posting seven consecutive gains, fell for the first time since January.

Strength in several components of the index was offset by a big drop in manufacturing hours and a fall in stock prices during the month.

Because the figures do not reflect the record plunge in stock prices that took place the last two weeks, many analysts predicted that the October index would fall by a much sharper amount.

Some economists said they believe the index was correctly signaling, at the very least, slower growth for next year, with the chance of a recession an increasing possibility.

“If we get three consecutive declines and the stock market is near the lows it reached, then that will be a clear signal of a recession,” said Allen Sinai, chief economist of Shearson Lehman Bros.