Leading Indicators Up; Home Sales Plunge 8.7%

New signs of a moderating economy came Tuesday on the heels of reports showing strong growth, leading some economists to conclude that the economy’s pace is slowing in fits and starts.

The Conference Board’s index of leading economic indicators rose by a scant 0.1% in October, although it was the ninth straight monthly gain. Separately, the Commerce Department said new-home sales plunged 8.7% in October to the lowest level in seven months.

These figures followed reports Monday of brisk holiday retail sales and a strong gain in U.S. manufacturing last month.

“When the economy is shifting gears, that doesn’t necessarily happen in a linear fashion,” said Kathleen Stephansen, senior economist at Donaldson, Lufkin & Jenrette Securities Corp. in New York.

“There will be a lot of back and forth,” she said. “One needs to look at these numbers with a trend in mind over a period of time.”

Tuesday’s reports did come amid other recent signs of moderating economic growth, such as flat personal incomes in October.

Wall Street has welcomed hints of slow growth, which would be likely to prevent the Federal Reserve Board from raising interest rates, and stock and bond prices gained Tuesday on the reports.

“Today’s reports show . . . that the economy’s slowing down, but it’s not an outright contraction,” said Kathy Bostjancic, money market analyst at UBS Securities Inc. in New York.

“Yesterday’s data was surprising,” she said, “but we are still quite languish in terms of overall growth.”

The Conference Board’s October index reading of 103.6 compares with a revised September level of 103.5 and a revised August reading of 103.3. The index operates from a base of 100, set in 1987, and is designed to forecast economic activity six to nine months in advance.

Of the leading indicators’ 11 components, six rose in October. The biggest gains came in stock prices and manufacturers’ orders for consumer goods and materials. The component hurting the index most was a drop in the average factory workweek.

The Conference Board, a private research group in New York, took charge of the index from the Commerce Department late last year.

Separately, the Commerce Department said sales of single-family homes totaled a seasonally adjusted annual rate of 714,000, down from 782,000 in September and the lowest since a 713,000 rate in March.

The drop was the largest since sales plummeted 9.1%, also in March. The report showed sales in September were much weaker than the initial 816,000 estimate. All regions of the country reported declines in new-home sales in October. In the West, sales dropped 8.9% to 195,000.

Still, sales in October remained above 700,000 for a 10th straight month, the longest stretch since a 36-month period between October 1976 and September 1979. So far this year, sales are 13.5% above those of the first 10 months of last year.

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Leading Indicators

Seasonally adjusted index: Oct. 96: 103.6

Source: Conference Board