Economic Indicators Inch Up Only 0.1% : Experts See Signal of Sluggishness in Growth by End of Next Year

The government said today that its chief forecasting gauge of future economic activity edged up a sluggish 0.1% in October after falling the previous month, signaling some sluggishness in growth by the end of next year.

The Commerce Department’s index of leading indicators had previously been estimated as falling only 0.1% in September, but today’s report revised that downturn to 0.3%.

Economists said the movement of the index appears to be pointing to slower growth but they have been hard-pressed to find much sign of it yet.

Other statistics for October, the latest available, all look very strong. Unemployment is at a 14-year low, factories are using more of their capacity than at any time in 8 1/2 years and personal income posted its steepest increase in a year.

“The message is clear that the fourth quarter is starting out very well. . . . There are no particular imbalances . . . (and) that suggests the economy should keep on expanding nicely for another six to nine months,” said Allen Sinai, an economist for the Boston Co.

However, the leading index is “clearly signaling a slowdown” in the second half of next year, he said.

Over the last 12 months, it has risen only 0.5%, compared with a gain of 6% for the previous 12-month period. It was the smallest October-to-October increase since 1979-80, before the last recession.

In October, four of nine available indicators were pointing to faster growth, while five were pointing to slower growth.

The factors pushing the index up, in order of magnitude, were an increase in building permits; a rise in stock prices; a jump in new orders to manufacturers for consumer goods, and a drop in initial claims for state unemployment insurance.

The negative factors were faster deliveries to companies, a sign of slackening demand; a drop in the price of industrial materials; a decline in the inflation-adjusted money supply; a shortening in the length of the average workweek, and a fall in orders for business equipment.