Leading Indicators Suggest Economic Slowdown : Forecast: Despite a higher-than-expected gain of 0.3% in November, analysts see more cooling.

After remarkably strong growth in 1994, the U.S. economy will slow next year but avoid a recession, the government’s forecasting gauge suggests.

The Commerce Department said Thursday that its index of leading economic indicators posted a 0.3% gain in November. The increase followed a 0.1% decline in October, the first setback in 15 months.

While the November gain was better than expected, analysts said that for the past six months, the performance of the index has clearly been signaling a slowdown in growth but, so far, no outright downturn.

Many analysts are forecasting low growth next year, as measured by the gross domestic product, which is expected to be below 3%. That would be significantly lower than the 4% GDP rate expected for 1994, a year in which the economy created more than 3 million jobs, pushing the unemployment rate to a four-year low of 5.6%.

That growth was led by a surge in consumer spending for homes, autos and other big-ticket items.

However, the rapid growth, coming in the fourth year of an economic recovery, spurred the Federal Reserve Board to launch an aggressive effort to boost interest rates to dampen demand and thus ward off higher inflation.

Analysts said there were hints in the November index report that this effort was starting to bear fruit, with interest-sensitive sectors such as construction showing weakness.

In a second report Thursday, the Labor Department said claims for unemployment benefits dropped by 3,000 last week, with 322,000 Americans filing initial claims at unemployment offices, reflecting continued strength in labor markets.

The jobs report was in line with other indicators showing 1994 is ending at an extremely rapid clip. That strength is likely to prompt the Fed to boost interest rates for a seventh time at its next meeting in late January, analysts said. But they were split on whether there would be further rate hikes.

Some argued that mounting signs of a slowdown will prompt the Fed to remain on the sidelines for the rest of 1995, but others said that inflation concerns will force the central bank to raise rates at least twice after January.

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Leading Indicators

Seasonally adjusted index

1987=100

Nov. 1994: 102.5

Source: Commerce Department