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Leading Indicators Drop for 1st Time in 15 Months

June 04, 1997|From Reuters

WASHINGTON — The nation's main economic forecasting gauge fell in April for the first time in 15 months, according to a report released Tuesday, the latest sign that a slowdown is likely later this year.

The Conference Board said its index of leading economic indicators, which is meant to forecast activity six to nine months ahead, fell 0.1% in April--the first decline since a 0.7% decline in January 1996--after rising 0.2% in March.

Six of its 10 components weakened from March and only four rose, which means the economy was losing steam after growing at a brisk 5.8% rate in the first quarter, a rate likely to spark higher inflation should it continue, analysts said.

"This indicator is pointing toward less robust activity than what we saw in the first quarter," said economist Gary Thayer of A.G. Edwards & Sons Inc. in St. Louis. "But it is not pointing to problems for the economy. Leading indicators are suggesting [slower] growth that is more sustainable."

Thayer said growth probably will slow to about 2.5% in the current quarter, strong enough to keep generating jobs but with less pressure on prices that can fan inflation.

A caution on inflation was sounded by the president of the Federal Reserve Bank of San Francisco, Robert Parry, who said that forces holding prices down, such as workers' job insecurity and a strong dollar, may be temporary.

"The longer-run concern about inflation remains a live issue," said Parry, who is generally known for taking a tough line on inflation risks. But he also said the economy is on a track for more moderate expansion.

"I'm reasonably optimistic that we will see some slowing to a more sustainable rate from the rapid growth in the first quarter," said Parry, a voting member of the Federal Reserve Board's policymaking committee.

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