Leading Economic Index Has 1st Drop in 9 Months

The index of leading indicators, battered by the stock market crash, fell 0.2% in October, the Commerce Department said today. It was the first decline in nine months for the government’s chief economic forecasting tool.

Still, the decrease was a smaller setback than economists had been expecting given the record 508-point drop in the Dow Jones industrial average Oct. 19.

In addition, the September figure, which originally had been reported as a 0.1% decline, was revised upward to show no change at all.

Fears of Recession

The index, composed of 11 forward-pointing business barometers, has taken on new importance since the collapse of the stock market as analysts search for signs of whether a new recession is on the way.

In the past, three consecutive monthly declines in the leading index have often signaled an impending recession, but the forecasting gauge is not infallible.

While some analysts are forecasting that the economy will be in a recession by the first half of 1988, others contend that the big plunge in the stock market is only a sign of a slowdown in economic growth.

The huge decline in stock prices was the biggest negative factor affecting the index last month. Were it not for the moderating influence of positive forces, the index would have been down more than 1% based on the performance of the stock market.

The biggest positive influence was an increase in the length of the average manufacturing workweek. Analysts said this advance was essentially a rebound from September, when this statistic had been artificially depressed because the labor survey was taken during the week of the Labor Day holiday.