Leading Indicators Off in November; 5th Straight Drop

The main gauge for predicting the course of the economy dropped for a fifth straight month in November, the Commerce Department said Friday, the latest evidence that the nation is slipping deeper into recession.

Economists said the steep 1.2% drop in the November index of leading indicators suggests that a quick end to the current economic downturn is not in sight.

The November figure followed a revised decline of 1.3% in October and 0.8% in September. Three or more straight drops in the basket of economic indicators is considered a reliable predictor of a shrinking economy.

“As far as the economy is concerned, there’s no reason for optimism,” said Ward McCarthy, managing director at Stone & McCarthy Research Associates Inc.

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. It was seen as a sign the economy would continue to deteriorate.

“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 decline last month in the index, which is designed to reveal the direction of the economy in six to nine months’ time, was broad-based and sharp. It exceeded Wall Street economists’ expectations of a 0.6% decline.

In November, eight of the 11 forward-looking components of the index fell.

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 workweek, a contraction in the inflation-adjusted money supply and a drop in building permits.

Three indicators were positive contributors. They were higher stock prices, slower vendor deliveries and improved consumer expectations.

The dollar and government bonds fell after the report was issued. Stocks showed mixed results.

ECONOMIC DROP These are among the factors cited for the drop in the Commerce Department’s Index of Leading Economic Indicators--the government’s chief economics measure--for the fifth consecutive month: * New orders to factories for consumer goods declined. * Prices of raw materials dropped. * The backlog of unfilled orders at factories declined. * Orders for business investment equipment fell. * Unemployment benefit claims rose. * The average workweek declined. * Inflation-adjusted money supply contracted. * Building permits declined. Offsetting declines in the index: * Stock prices rose. * Consumer confidence rebounded slightly after the plunge resulting from Iraq’s invasion of Kuwait. The index is at 139.7% of its 1982 base of 100, down 4.4% from June, the worst showing since 1981.