Forecast Shows Economy Poised for Growth

The U.S. economy appeared poised for steady expansion in 1999, after a major forecasting gauge moved higher for the first time in three months, but the factory sector remained in the doldrums, reports showed Tuesday.

The index of leading economic indicators rose 0.1% in October, after being unchanged in both September and August, the Conference Board, a New York-based business research group, reported. The index was last positive in July, when it rose 0.5%.

However, a separate report from the National Assn. of Purchasing Management showed the factory sector was suffering from the steep drop-off in exports caused by economic woes in Asia and many emerging economies.

NAPM’s closely watched index of manufacturing activity fell sharply in November to 46.8 from 48.3 in October. A reading below 50 suggests contraction in manufacturing, while a number above that level suggests growth.

November was the sixth straight month the index has shown a shrinking factory sector.

Still, the export orders index, a gauge of Asian and other international demand, rose to 42.9 in November from 42 during October, the second increase in the last three months.

Norbert Ore, head of NAPM’s survey committee, said the figures didn’t suggest a contraction in the overall economy.

“I don’t think we are close to recessionary problems,” Ore told reporters in a conference call.

Separately, the Commerce Department said spending on U.S. construction rose 0.3%--to a seasonally adjusted annual rate of $665.8 billion--in October, matching September’s rise and the fifth straight monthly increase.

Economists noted that the service sector, which is more insulated from global difficulties than the factory sector, has remained healthy and has helped make up for the slump in manufacturing.

The Conference Board said its leading indicators index gave no indication of an economic downturn on the horizon.

“Following two months of generally flat numbers for the leading indicators, we are seeing some signs of economic growth being rekindled,” Michael Boldin, director of business cycle research at the Conference Board, said in a statement.

Changes in the leading indicators are intended to predict turning points in the business cycle such as a pickup in growth or a recession.

Six of the 10 leading indicators that make up the index rose in October and four were down.

Among the components, money supply growth, the number of building permits issued for new private housing and the length of the factory workweek sent the strongest positive signals about the economy.

But initial claims for state unemployment insurance and an index of consumer expectations were among the components that sent negative signals.