- The Washington Times - Thursday, November 18, 2004

NEW YORK (AP) — The economy could be headed for slower growth in the next several months, according to a report released yesterday by a private research group. A separate report showed a drop in weekly claims for unemployment benefits.

The Conference Board said its Index of Leading Economic Indicators fell in October for the fifth straight month. While the declines have been relatively small, they provide a “clear signal that the economy is losing steam,” said Ken Goldstein, an economist for the New York-based group.

The index fell 0.3 percent in October — worse than the 0.1 percent decline economists had been expecting — following declines of the same amount in September, August and July. The indicator, which is intended to predict economic activity over the next three to six months, now stands at 115.1 versus its record high of 116.5 in May.

However, the Conference Board noted that while signs of economic weakness have become more widespread in recent months, the recent declines in the index have not been large enough or persistent enough to indicate that the economic expansion is coming to an end.

Many economists think the economy could be headed for cooler growth in the months ahead, but how much remains a subject of debate. Recent data have been clouded by the unusual effects of the hurricanes in Florida as well as jitters among consumers and businesses in the run-up to the presidential election.

With those factors gone, the main uncertainties facing the economy are how many jobs will be created in the coming months, as well as how robust consumer spending will be during the holiday season, which is critical to retailers.

“We do think things will slow down — the question is how much?” said David Wyss, an economist at Standard & Poor’s, a financial services firm.

Mr.Wyss said economists were looking to see how much consumer confidence might rebound now that oil prices were coming off their recent highs and the election is over.

The index is calculated by combining a number of factors believed to be good indicators of the direction of the economy over the next three to six months, such as manufacturing, interest rates, consumer expectations, stock prices and money supply.

Despite the decline in the leading indicators, other recent data have suggested strength, including a surge in industrial production and housing construction last month.

Responding to signs of an economic rebound, the Federal Reserve Board has begun nudging short-term interest rates higher in order to stave off inflation.

Last week, the Fed raised its benchmark short-term interest rate for the fourth time in the past five months, and appeared to suggest that more credit tightening was on the way. The Fed also gave a more upbeat assessment of the economy than in its meeting in September.

Jose Rasco, an economist with Merrill Lynch, said that while predictions remain difficult, he thinks economic growth could decline to about 3 percent next year from 3 percent to 4 percent this year.

“We’re kind of at a crossroads here,” said Mr. Rasco.

In a positive sign for labor markets, the Labor Department reported yesterday that new claims for unemployment insurance dropped by a seasonally adjusted 3,000 to 334,000 last week, the lowest level since the end of October. New filings increased by 5,000 the previous week.

The labor market has lagged behind other parts of an economic turnaround that has taken hold since the summer.

Businesses have been cautious about hiring new workers, though in recent months there have been some signs of a pickup in hiring.

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