Car Sales, Key Indicators Point Down : A Drop in Economic Forecasting Gauge Is More Bad News for Bush
The government’s chief economic forecasting gauge fell in June for the first time in six months, the Commerce Department said Tuesday, signaling that the economy is likely to stay wobbly beyond the November election.
The index of leading indicators, designed to predict economic activity six to nine months in advance, dropped 0.2% in June. It was the first fall in the index since it declined 0.1% in December and the worst since January, 1991.
The drop followed gains of 0.6% in May and 0.3% in both April and March.
Analysts expected the slight decrease and said it was not a sign of renewed recession but a symptom of the weak and erratic growth bedeviling the economy since the middle of last year.
“It’s evidence we’re in . . . for more of the same--a lackluster, limpid, lethargic performance that goes on month after month,” said economist Robert Dederick of Northern Trust Co. in Chicago.
“The drop indicates that the recovery is uneven and wilting,” said William MacReynolds, chief forecaster for the U.S. Chamber of Commerce. He called the report “another piece of solid evidence that the recovery will not get much better, thus resulting in a painfully slow period of growth.”
Rising disgruntlement over the weak economy and slim job prospects have dragged down consumer confidence and may spell trouble for President Bush in his fight for reelection on Nov. 3.
An even more politically important statistic--the unemployment rate for July--is scheduled for release by the Labor Department on Friday. Despite five consecutive quarters of weak economic growth that economists say constitute a recovery, the nation’s unemployment rate has continued to rise.
Many analysts now believe joblessness, after hitting an eight-year high of 7.8% in June, will improve slightly. But few are as optimistic as Bush Administration prognosticators who believe it will dip below 7% by the end of the year.
“Unless that rate can drop noticeably between now and November, people are going to feel pretty glum and take it out on incumbents,” said economist Paul Boltz of T. Rowe Price Associates in Baltimore. “I think we’ll see some improvement . . . but I think the improvement will be perceived as late in the day.”
In June, six of the 11 forward-looking indicators that comprise the leading index contributed to its decline. One was unchanged and four were positive.
The six negative indicators included a weaker money supply, a shorter work week, more applications for unemployment benefits, lower stock prices, fewer building permits and depressed consumer expectations for the future.
The positive indicators were a gain in new orders and contracts for business equipment and buildings; a rise in new orders to factories for consumer goods; a slowdown in business delivery times, which indicates increased demand, and an increase in the price of various raw materials.
The backlog of unfilled orders at factories was virtually unchanged and did not push the overall index in either direction.
Index of Leading Indicators
Seasonally adjusted index, 1982=100
June, 1992: 149.6
May, 1992: 149.9
June, 1991: 143.9
Source: Commerce Department
