Key Economic Forecasting Gauge Drops Again
The government’s chief economic forecasting gauge dropped for the fifth consecutive month in November, the government said today in a report that offered little hope that the slumping economy would recover soon.
The 1.2% plunge in the Commerce Department’s index of leading economic indicators followed an even worse 1.3% drop in October. That decline, revised from a previous estimate of 1.2%, was the worst since November, 1987.
The latest steep drop follows a spate of gloomy economic news for the month, including a jump in the unemployment rate and plunging orders for “big ticket” durable goods such as automobiles and appliances.
“I think it’s consistent with the other evidence that the recession is clearly in place and clearly has further to go,” said economist Robert G. Dederick of Northern Trust Co. in Chicago.
“The November indicators leave no doubt that a serious and lengthy recession is under way,” said economist William K. MacReynolds of the U.S. Chamber of Commerce. “The only remaining questions are just how far the economy will plummet and how long it will stay there.”
Three consecutive declines in the index--designed to predict economic activity six to nine months in advance--are considered a fairly good, but not infallible, sign a recession is approaching.
The index rose slightly as recently as June, but most private economists believe that the nation has already toppled into a recession.
Pulling the index down, in order of importance, were: a decline in new orders to factories for consumer goods, a drop in prices of raw materials, a decline in the backlog of unfilled orders at factories, a fall in new orders for business investment equipment, a jump in new claims for unemployment benefits, a decline in the average work-week, a contraction in the inflation-adjusted money supply and a drop in building permits.
The only positive contributors were an increase in stock prices, a slowing in business delivery times and a slight improvement in consumer confidence after a plunge after Iraq’s August invasion of Kuwait.
