- The Washington Times - Monday, March 20, 2006

NEW YORK (AP) — A closely watched gauge of future economic activity declined slightly last month after a sharp rise in January, a private research group said yesterday.

The decline, which follows four months of gains, suggested to some analysts that the nation’s economic growth will slow in the second half of the year.

The Conference Board said its Index of Leading Economic Indicators fell 0.2 percent last month after a revised 0.5 percent rise in January. The January increase had initially been reported at 1.1 percent.

Economists on Wall Street had expected the index to decline 0.3 percent in February.

The Conference Board said its coincident index, a measure of the current economy, rose 0.3 percent in February after no change in January and a 0.4 percent increase in December.

In the latest report, the largest negative components were consumer expectations, building permits and stock prices. The positive components included manufacturers’ new orders for non-defense capital goods and orders for consumer goods and materials.

“Essentially, the story is we have got moderate growth through the first quarter. We may tick up in the second quarter, and we may tick down in the third quarter,” said Ken Goldstein, economist at the Conference Board. “Growth is going to be a little slower second half of the year.”

Frank Nothaft, chief economist at the mortgage consolidator Freddie Mac, said some of the growth anticipated for the first half of the year is related to reconstruction efforts amid regions hurt by hurricanes last year.

“This pumps more money into the economy, spurring growth,” he said, adding that the slowdown in the later half of 2006 would reflect the series of interest rate increases engineered by the Federal Reserve.

While the index of leading economic indicators dipped in February, the nation’s economy saw gains in the jobs market. That same month employers expanded payrolls by 243,000 jobs, far more than expected.

When it comes to the sharp downward revision in January’s leading economic indicators, economists at High Frequency Economics Ltd. said the data may have been skewed by a drop in aircraft orders not taken into consideration when the January report was first published.

“The January revision is mostly due to the plunge in aircraft orders reported in the durable goods numbers,” according to the report from High Frequency Economics. “The durables report was not available when the LEI was compiled, so the Conference Board assumed orders for non-defense capital goods were unchanged.”

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