Originally created 08/05/98

Leading indicators off for second month



NEW YORK -- A key gauge of future economic activity fell in June for the second month in a row, signaling a further slowing of the nation's economy. Wall Street, jittery that corporate earnings will turn listless, extended a sharp retreat from record heights, with the Dow industrials at down nearly 300 points.

While today's Conference Board report pointed toward a cooling of an economy that is in the eighth year of an expansion, it said it is premature to say a recession is looming.

Stocks, meantime, continued a slide. The Dow Jones industrial average plummeted 299.43 points to 8,487.31 points, more than 700 points below July 17's record high of 9,337.97.

The Conference Board, a private business research group, reported that its Index of Leading Economic Indicators for June stood at 105, down 0.2 percent from the previous month. The decline was in line with economists' expectations.

The measure slipped 0.1 percent in May. Earlier, the board had reported it held steady during that month.

The back-to-back declines were the first since a string of five declines in January through May of 1995, and the Conference Board said they signaled "slower growth ahead and only a slight risk of a contraction."

"The U.S. economy is downshifting now," said Allen Sinai, chief global economist at Primark Decision Economics. "The Leading Economic Indicators suggest that six to nine months from now, the U.S. economy will stay on a slower growth mode."

The June decline was largely caused by an increase in initial claims for state jobless compensation, a result of the lengthy strikes against General Motors by the United Auto Workers union.

"The rise of unemployment claims in June, largely due to a fallout of the since-settled General Motors strike, drove most of the decline in the leading index," said Conference Board economist Michael Boldin.

He said other components making up the index were mixed, suggesting the slowdown in the economy measured by other indicators for the second quarter will continue.

"But," he said, "it is too early to consider this a recession warning."

Six of the leading index's 10 components slipped in June. Other decliners were manufacturers' orders for consumer goods, consumer expectations, interest rate spread, building permits and stock prices.

The leading index is designed to forecast economic activity six to nine months in advance.

The board's index of coincident indicators for June, which looks at the economy's current condition, rose 0.1 percent from May. The lagging indicators index, which looks at the past, advanced 0.6 percent.

The leading index operates from a base of 100, set in 1992. First calculated in the late 1960s, it is periodically fine-tuned and figures from past years are revised.