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Economy Up by Tiny 0.1% in November : Growth Falls Sharply in Weakest Advance Since June Figures

December 30, 1985|Associated Press

WASHINGTON — The government's main gauge of future economic activity rose a tiny 0.1% in November, its weakest advance since June, the Commerce Department said today. Nevertheless, the Reagan Administration and some private economists predicted that the nation's economic fortunes will improve in the new year.

Last month's gain by the index of leading indicators was down sharply from the 0.4% increases registered in September and October.

Without a big rise in stock prices during the month, the index would have shown a 0.3% decline.

Matches June Rise

The November gain matched a 0.1% rise in June and was the weakest change since a 0.5% decline in April.

The weak showing surprised many analysts who had been expecting a much better performance, given the fact that the stock market hit record highs during the month.

But the slight advance was in line with expections that the economy will continue growing next year, though at much the same sluggish rate as in 1985.

Many analysts feel that 1986 is shaping up to be a virtual replay of this year with modest growth, continued low inflation and further declines in interest rates.

'Old Age' Recovery

While few analysts are predicting a recession, they aren't looking for very robust growth, either. One of the reasons for the pessimism is the fact that the economy is in the fourth year of recovery from the 1981-82 recession, considered old age as recoveries normally go.

Many economists are predicting a modest advance in the gross national product of between 2.5% and 3% for all of 1985.

This would be only slightly better than the preliminary estimate that the economy this year grew at a 2.4% rate, down sharply from the robust 6.6% growth realized in 1984.

The Reagan Administration, however, is predicting much faster growth next year at a rate of around 4%. While this is definitely higher than the prediction of most private analysts, some economists share this optimism.

Michael Evans, head of Evans Economics, a Washington forecasting firm, said he believes that the GNP will grow 4% next year as business investment improves.

Stock Market Records

Evans and economists in the Administration cite the record-setting stock market advance and the big declines in interest rates of recent weeks as evidence that the economy is reviving as the year ends.

The stock market was one of only four indicators that showed increases for November. Other indicators that contributed to the rise were net business formation, changes in raw materials prices and manufacturers' orders for consumer goods.

Five indicators had a negative effect on the index--the level of business and consumer credit, speed in filling orders, orders for capital equipment, building permits and weekly unemployment claims.

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