Slower Growth Seen as Indicators Rise 0.2%

The index of leading economic indicators, the government’s main barometer of economic trends, rose 0.2% in September, a sign of slowing growth, the Commerce Department said Tuesday.

The index, designed to predict the economy’s direction six to nine months ahead, was supported by rising consumer optimism and an expanding supply of money, which can fuel growth.

At the same time, however, seven of the 11 index components, including manufacturers’ orders for consumer goods and new plant orders, declined during the month.

“The report confirms what we’ve been thinking,” said economist David Berson of Fannie Mae, the government home mortgage agency. “The economy is weaker now than a few months ago, but it’s not so weak that we’re going to fall into a recession.”

Even with the slowing rate of growth, analysts said, inflation remains enough of a threat to keep the Federal Reserve from lowering interest rates as a stimulant to the economy.

The Labor Department, for instance, reported Tuesday a 5.1% rise in the employment cost index for the year ending Sept. 30, after a 4.7% gain in the previous year.

Economists said employers were bidding up wages as the economy approaches full employment, a factor contributing to inflation and squeezing profit margins.

Four indicators rose because of rising expectations, money supply, the average workweek and stock prices. Seven components declined. The steepest drop was in manufacturers’ orders for consumer goods, followed by dwindling backlogs, declining plant orders and a slower rate of delivery.

The index was also held back by unemployment insurance claims, fewer building permits and declining sensitive-materials prices.

With September’s increase, the index stood 145 points above its 1982 base of 100.