- The Washington Times - Monday, July 21, 2003


A gauge of economic activity improved slightly in June for the third consecutive month, buttressing the view that the nation is on the cusp of a financial recovery even if signs of weakness persist.

The Conference Board reported yesterday that its Index of Leading Economic Indicators increased by 0.1 percent in June to 111.8, in line with analysts’ expectations. However, with high unemployment and weakness in the manufacturing sector, economists said it is too soon to know whether the United States is about to enjoy a period of steady economic growth.

“The rebound in the economy is still more of a forecast than a fact,” said Douglas Porter, senior economist at Nesbitt Burns Securities of Chicago.

“There’s no question that there are still clouds over the economy and the darkest cloud is the employment picture,” Mr. Porter said. “Still, the underlying sense is that things are improving.”

Four of the 10 components of the leading indicators index rose in June, including the real money supply, stock prices and building permits, the New York-based Conference Board said.

Among the components that declined in June were consumer expectations and manufacturers’ new orders for consumer goods and materials. Manufacturing hours and new orders for non-defense capital goods were unchanged.

The leading index, which rose 1.1 percent in May and 0.1 percent in April, is supposed to measure where the overall U.S. economy is headed over the next three to six months. It stood at 100 in 1996, its base year.

The board’s coincident index, which measures current economic conditions, increased 0.1 percent in June, while the lagging index dropped 0.5 percent.

“I still think we need to be a little cautious,” said Ken Goldstein, a Conference Board economist.

Yesterday’s report lent support to the view of many economists that, while the worst may be over, consumers and businesses still are on shaky ground.

“Now that the mortgage rates are rising, housing may not be as supportive as it has been in the past,” said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.

Mr. Sohn said the tax cut, low interest rates and the weaker dollar have not yet provided the economic stimulus many have been hoping for and, for that reason, business and consumer confidence remain low.

Economists consider increased corporate spending on equipment and technology over the past year a hopeful sign, but on the other hand they remain distressed about unemployment, which hit a nine-year high of 6.4 percent in June.

Sherry Cooper, global economic strategist for Harris Bank of Chicago, said she expects the employment picture to begin improving by October as companies look to rebuild shrinking inventories once the summer is over.

Miss Cooper also believes the tax cut will eventually stimulate the retail sector, which in turn will prompt new orders for goods and the need to hire more workers.

“I just think it’s just going to take a couple of months,” she said.

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