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Leading economic indicators slip in April

Tuesday, May 21, 2002

NEW YORK -- A key gauge of U.S. economic activity fell in April for the first time since September, suggesting a sluggish economic recovery, a private research firm said Monday.

The New York-based Conference Board reported its Index of Leading Economic Indicators declined 0.4 percent last month to 111.7 after rising 0.1 in March. Analysts had forecast a 0.1 percent decrease.

"The signal from the indicators is that the recovery is developing quite slowly," Conference Board economist Ken Goldstein said. "Despite the strong growth in Gross Domestic Product in the first quarter, the recovery in the industrial core remains weak."

Consumption remains the engine of economic growth. But layoffs and slower growth in wages has cut into consumers' income, Goldstein said.

Rising energy costs and the completion of most mortgage refinancing could slow household purchases in coming months, he said.

At the same time, business investment and exports remain weak, giving the economy little protection from a dropoff in consumer demand, Goldstein said.

Temporary setback

But economists said the decline is typical during a recovery and characterized it as a temporary setback.

"I don't think there is any danger right now that it will lapse into a double-dip economic recession," said Sung Won Sohn, chief economist with Wells Fargo & Co. in Minneapolis.

On Wall Street, the markets were lower Monday, with the Dow Jones industrial average down 124 points to 10,230 and the Nasdaq composite index 40 points lower at 1,702.

The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.

Also, interest rates on short-term Treasury securities were mixed in Monday's auction.

The Treasury Department sold $17 billion in three-month bills at a discount rate of 1.730 percent, down from 1.750 percent last week. An additional $15 billion was sold in six-month bills at a rate of 1.900 percent, up from 1.870 percent.

The three-month rate was the lowest since April 22 when the bills sold for 1.690 percent. The six-month rate was the highest since April 15 when the rate was 1.905 percent.

The new discount rates understate the actual return to investors -- 1.760 percent for three-month bills with a $10,000 bill selling for $9,956.30, and 1.946 percent for a six-month bill selling for $9,903.90.

In a separate report, the Federal Reserve said Monday that the average yield for one-year constant maturity Treasury bills, the most popular index for making changes in adjustable rate mortgages, rose to 2.40 percent last week from 2.31 percent the previous week.


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