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Latest signs say up, up and away

In a sign the economy's seven-year expansion won't slacken soon, a key economic barometer rose in September for its fifth straight monthly increase.

The 0.2 percent rise in the Index of Leading Economic Indicators, released Tuesday, suggests the economy will keep growing through the spring. The Conference Board's report showed the index rising to 104.5, matching analysts' expectations and following a similar increase in August.

The leading index's string of gains is a sign no halt is imminent to the economic expansion, already the third longest in U.S. history.

The stock market, seeing no surprises in the report, shrugged off the news and remained little changed despite another drop in Hong Kong's volatile market. Wall Street investors sold shares to cash in on Monday's rally, which featured a 232-point jump in the Dow Jones Industrial Average, the third-biggest point gain ever.

"The market's pretty strong, and I imagine there's been some profit-taking here," said Eugene G. Mintz, financial markets analyst at Brown Brothers Harriman & Co.

The historic 554-point drop in the Dow Jones Industrial Average Oct. 27 left some analysts wondering whether the economy's slow and steady expansion had been damaged by the Southeast Asian currency market turmoil that had prompted the sell-off. But most economists now say that, although the region's devalued money may lead to fewer U.S. exports to the region, the impact on America's economy would likely be slight.

Estimates of sales to the Asian "tiger economies" range from 4 percent to 9 percent of U.S. exports. Judging from the impact of the Mexican currency crisis, exports could fall by 2 percent or 3 percent, said Cynthia Latta, an economist at Standard & Poor's DRI in Lexington, Mass.

"The U.S. economy is not doing badly, but the turmoil in Southeast Asia and some spillover to Latin America is going to hurt the profits of some American companies," she said.

The stock market remains below where it was before Asian currency concerns led to last week's plunge. But the fundamentals of the economy appear strong, Mintz said.

For the year, the Dow has gained almost 19 percent, more than expected when 1996 ended but well below the 28 percent surge as of Aug. 6, when the Dow reached record heights.

News on the economy's course had moved stocks strongly before last week, with any signs of robust growth triggering inflation fears, raising the specter of an increase in interest rates to cool things off.

However, since last week's stunning setback, few analysts believe the Federal Reserve will unsettle markets further by raising rates when its policy-setting Open Market Committee meets Nov. 12. And Fed Chairman Alan Greenspan's comments in the wake of the Dow plunge were widely interpreted as a sign no rate increase would come this month.

The leading index is a signpost for changes in the economy's direction. When the index changes course and holds that new heading for at least three straight months, indications are the economy also is shifting gears.

Over the six months through September, the leading index increased 1.6 percent. During the same period, seven of the 10 leading economic indicators advanced.

The Conference Board, a private research group, said six of the 10 leading indicators rose in September, with the most significant gains coming in a decline in new weekly claims for unemployment benefits and the growth of the money supply. The most significant decline in September was new orders received by manufacturers.