Board Says Key Indicators Herald Slowdown in 2001

A key forecasting gauge for the U.S. economy fell in November, indicating that “significantly” slower growth awaits in the first half of 2001, a private research firm said Wednesday.

The Conference Board said its index of leading indicators fell 0.2% in November after a 0.3% decline in October that was initially reported as a 0.2% decline. November’s decrease matched expectations of Wall Street economists.

“The indicators are pointing to significantly slower growth in the first half of 2001,” Conference Board economist Ken Goldstein said.

The leading index has fallen in eight of the last 10 months, after posting a 1.5% to 2% gain each year in the last three years.

However, Goldstein said that the index is only 0.4% lower than one year ago, not a mark of any “major contraction” in business conditions.

“All this talk about recession or near recession is way overdone,” Goldstein said. “In fact, it’s bordering on irresponsibility.”

He said that, with consumption continuing to grow, it is highly unlikely that the world’s largest economy will slide into a recession or even drop to an anemic and painful 1% level of growth any time soon.

In the months preceding past recessions, the leading indicators index registered bigger declines--sometimes up to a full percentage point--that pointed to “outright weakness,” said Russ Sheldon, senior economist for Nesbitt Burns Securities of Chicago.

Another sign that the economic slowdown is minor, Sheldon said, is that the leading indicators show most of the softening is in manufacturing and don’t account for the technology industry’s contributions to U.S. growth.

The index reached its high of 106.3 in January, but has fallen since. It is down 0.4% from a year ago, making it the index’s first down year in three years. The index gained 1.5% to 2% annually the three previous years.

Half of the 10 components that make up the leading indicators index gave negative signals about the future economic course in November. The largest of these was average weekly initial claims for unemployment insurance. Also suggesting weakness were average weekly manufacturing hours, vendor performance, new orders for consumer goods and stock prices.

The three components that posted gains were manufacturers’ new orders for non-defense capital goods, building permits and the index of consumer expectations. Interest rate spread and money supply were unchanged in November.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Index of Leading Indicators

Seasonally adjusted index; 1996=100.

November: 105.3

Source: Conference Board