- The Washington Times - Wednesday, November 21, 2001

NEW YORK (AP) A key forecasting gauge of U.S. economic activity moved slightly higher last month, but not enough to suggest the economy is likely to recover anytime soon, analysts said.

The Conference Board said yesterday its Index of Leading Economic Indicators rose 0.3 percent in October to 109.4 after tumbling 0.5 percent in September and dipping 0.1 percent in August.

"The Federal Reserve is responsible for most of the strength in the index," said Michael Swanson, chief economist at Wells Fargo & Co., referring to the board's interest-rate cuts. "Don't read too much into this particular number. It's better than a decline, but you have to take off the cover and look underneath it and see what's driving it."

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.

The report coincided with another released yesterday by the Commerce Department saying the September 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 September 11 terrorist attacks, which offset a growing deficit in goods.

The markets finished lower after the release of the reports amid some profit-taking, with the Dow Jones Industrial Average down 75 points at 9,901 and the Nasdaq Composite Index off nearly 54 points at 1,880 in afternoon trading.

The Conference Board largely attributed the October gain in the index to higher stock prices and the Fed's interest-cutting campaign over the past year. But the labor and housing sectors lost ground.

The central bank has cut interest rates 10 times this year to boost the slumping economy, which was already besieged by a surge in layoffs, weak corporate earnings and sagging stock prices before the attacks in New York and just outside Washington. The Fed is expected to reduce rates an 11th time when it meets in December.

"Zero-point-zero percent financing and low mortgages are great for people who have jobs," Mr. Swanson said. "But if you don't have one, no one is going to lend you money anyway."

Mr. Swanson said improvement in employment and factory use would convince him that the economy is on the verge of turning the tide.

Conference Board economist Ken Goldstein also appeared unimpressed by the increase in the index, saying it rose simply because the attacks exaggerated September's figure.

The September drop, the largest one-month decrease since January 1996, wouldn't have been as sharp absent the attacks, thereby improving the October reading, he said.

The Conference Board is a nonprofit research and business group, with more than 2,700 members.

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