Tuesday, May 20, 2003

Index portends slow growth

Leading indicators up just 0.1 point

The Associated Press

NEW YORK - The economy looks set to continue at its sluggish pace for the next three to six months, according to a widely watched index.

The Conference Board, a New York-based research group, Monday said its Index of Leading Economic Indicators rose by 0.1 point last month to 110.6.

It was the first increase in three months, but it gave little sign of any brisk recovery after the war against Iraq. The economy has been in a "soft spot" for more than half a year, with employment particularly weak.

Economist Carol Stone at Nomura Securities International in New York noted that the April reading was lifted mostly by the rise of the stock market and consumer expectations, while harder data on jobs and manufacturing held it down.

"We still have a ways to go. The best we can get out of this is that it stopped falling," Stone said.

The index fell 0.2 points in March and 0.5 points in February.

Conference Board economist Ken Goldstein said the index suggested that the country's gross domestic product will increase at an annual rate of 1.5 percent in the second quarter, about the same as the last two quarters.

"While the economy is growing and not losing momentum, growth is very slow and will be that way for at least a few more months," Goldstein said.

The slight rise in the index matched analyst expectations, but stocks accelerated their decline after the report was released. In afternoon trading, the Dow Jones industrial average was down 177 points at 8,502, while the Nasdaq composite index was off 37 points at 1,502 and the S&P 500 was 22 points lower at 923.

Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis, said the index reading was mostly a reflection of how the economy did during the war against Iraq.

"There really hasn't been enough time after the war to get a clean indicator," Thayer said.

He noted that interest rates are still very low, a tax cut is coming and a declining dollar is boosting American exports.

"We got a lot of good things happening, it's just going to take time for it to happen," he said.

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