Index of Economic Indicators Declines in March

A key U.S. economic forecasting gauge fell in March as fears of a prolonged war in Iraq sent oil prices surging and confidence plunging, a private research firm said Monday.

The Conference Board said the index of leading economic indicators fell 0.2% last month, after a 0.5% drop in February.

Before the war began March 19, crude oil prices rose to a 12-year high, damping consumer confidence and causing companies to trim costs by cutting payrolls.

Mounting job losses may jeopardize consumer spending, which accounts for more than two-thirds of the economy, according to the report.

Five of the 10 indicators the Conference Board uses to derive the index contributed to the fall, and four signaled the reverse. One measure, the number of hours factory employees worked, was unchanged.

Besides falling consumer sentiment and rising job losses, a drop in permits to build new homes was the biggest drag on the index.

Also helping to account for the drop were a decline in the money supply adjusted for inflation, and a narrowing spread between the yield on the Treasury’s 10-year note and the rate banks charge each other for overnight loans.

These were partly offset by an increase in the Standard & Poor’s 500 index, a jump in new orders for consumer goods and for plants and equipment, and a rise in how long it takes producers to deliver goods -- suggesting that factories are having difficulty keeping up with orders.

Still, the winding down of the war has led to a rebound in consumer expectations, and prices of stocks in the S&P; index have registered additional gains. That suggests growth may accelerate.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, was unchanged in March after falling 0.2%. The index tracks payrolls, incomes, sales and production.

The loss of 490,000 jobs since November has kept the index from regaining its pre-recession highs and prevented the group from calling an end to the contraction that started in March 2001. The index registered 115.3 in March, compared with a high of 116.3 in December 2000. The low of 114.3 was in November 2001, one reason many economists say the recession ended toward the end of that year.

The index of lagging indicators declined 0.1% last month, compared with a 0.2% drop in February.