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Indicators Flat in July; Dip Seen for August

From Reuters

The government’s main guide for predicting the direction of the economy was unchanged in July from June, the Commerce Department said Wednesday, but economists predict that it will soon point downward because of the Persian Gulf crisis.

The index of leading indicators, a basket of measures for gauging future economic activity, was unchanged in July after rising a revised 0.1% in June and 0.6% in May.

The July index showed a glimmer of strength in higher orders for manufactured goods, which analysts said could keep the economy out of recession. But the index did not reflect the plunge in consumer confidence, a component of the index, since Iraq’s invasion of Kuwait on Aug. 2.

The Conference Board, a New York business research group, said Monday that consumer optimism about the economy was at its lowest level in more than seven years because of concern over the Mideast crisis, which has sent energy prices soaring.

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“We still think the economy has enough momentum to avoid a recession,” said Daryl Delano, senior economist with Cahners Economics in Newton, Mass. “But this index is likely to be down sharply in August.”

The index is designed to predict the economy’s direction in six to nine months’ time. Financial markets showed little response to the report because the July data has been overshadowed by Mideast developments.

Delano said he has revised his forecast for total 1990 growth in gross national product down to 1.4% from 2% but believes that stronger overseas sales will keep the United States out of recession. The declining dollar has made U.S. products more competitive in foreign markets.

The GNP grew at a sluggish 1.2% annual rate between April and June, down from 1.7% in the first quarter.

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