Economic indicators rise; economists wary
Wednesday, November 21, 2001
NEW YORK -- A key forecasting gauge of U.S. economic activity rose 0.3 percent last month, but analysts said Tuesday it was not enough to suggest the economy is ready to recover.
The Conference Board said its Index of Leading Economic Indicators rose to 109.4 last month after tumbling 0.5 percent in September and dipping 0.1 percent in August.
The index indicates where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year.
Analysts were expecting no change in the October figure and some said the index rose only because of interest rate cuts made by the Federal Reserve.
"Don't read too much into this particular number," said Michael Swanson, chief economist at Wells Fargo & Co. "It's better than a decline, but you have to take off the cover and look underneath it and see what's driving it."
Conference Board economist Ken Goldstein also appeared unimpressed by the October figure, saying it rose simply because the Sept. 11 attacks had exaggerated September's drop.
The report coincided another released by the Commerce Department saying the U.S. trade deficit narrowed by a record amount in September to $18.7 billion. But the improvement was due mostly to huge payments by foreign insurance companies for the attacks, which offset a growing deficit in goods.
The markets were lower following the release of the reports.
The Conference Board largely attributed the October gain in the index to higher stock prices and the Fed's actions.
The central bank has cut interest rates 10 times this year to boost the slumping economy, which was already hurt by a surge in layoffs, weak corporate earnings and sagging stock prices before the attacks in New York and Washington. The Fed is expected to reduce rates an 11th time when it meets in December.
Swanson said improvement in employment and factory use would convince him the economy is on the verge of turning the tide.
The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.