Leading Indicators Rise 0.3% in August : 1989 Annual Rate Index to Date Up 3.8%, Compared With 4.5% Increase for All ’88

The government’s chief economic forecasting gauge rose 0.3% in August, its second consecutive advance, indicating continued growth in the months ahead, the Commerce Department reported today.

The increase in the index of leading indicators, designed to foretell economic activity six to nine months into the future, followed a 0.1% gain in July. It declined 0.1% in June.

Today’s index reinforced recent government and private industry reports indicating that the nation’s longest peacetime economic expansion will reach its seventh birthday in December.

“I think if we’re going to have a recession it probably won’t start before then and I still think we will squeeze through 1990 without one,” said Lawrence Chimerine, senior economic adviser at the WEFA Group in Bala Cynwyd, Pa. “But it won’t be very buoyant growth.”

So far this year, the leading indicators have bounced back and forth--up in January, April, July and August, and down in February, March, May and June. In the past, three consecutive declines sometimes, but not always, have signaled a forthcoming recession.

‘Consistent With Slow Growth’

“This trendless result for 1989 seems consistent with the slow growth experience of the overall economy,” said Ysabel Burns McAleer of the American Financial Services Assn.

Five of the 11 forward-looking business statistics that make up the composite index contributed to the August gain--an increase in manufacturers’ new orders, higher stock prices, an increase in the money supply, lower initial unemployment claims and increased building permits.

The others pointed down--a drop in an index measuring consumer confidence; lower prices for sensitive materials, indicating slower demand; a decrease in manufacturers’ unfilled orders; fewer orders for plants and equipment; faster vendor deliveries, meaning declining demand, and a shorter workweek.

So far this year, the index has risen at an annual rate of 3.8%, compared with an increase of 4.5% for all of 1988.

The economy has been growing steadily since November, 1982, when the nation came out of its last recession, but many thought it might be pushed into another downturn this year by Federal Reserve efforts to slow inflation.

Supply Tightened

Beginning in March, 1988, the Fed gradually tightened the nation’s credit supply. Its goal became known as the “soft-landing”--continued, but slower economic growth to keep inflationary pressures in rein.

Some economists, like David Jones of Aubrey G. Lanston & Co., a New York government securities dealer, try to avoid the “soft-landing” description.

“The term is so overused that I hate to use it,” Jones said. “In some sense, it’s not a landing story at all. It’s an economy that’s growing at lower altitude of GNP (gross national product) growth than we saw last year.”