The U.S. index of leading
economic indicators fell in September for the fourth month in a
row, the first time that has happened since the start of the 1990-
91 recession. The drop suggests the recovery may stall through the
first quarter of next year.
The Conference Board’s index dropped 0.2 percent after
falling a revised 0.1 percent in August. Over the past six months,
the index has declined at an annual rate of 0.5 percent. It would
take a 3.5 percent rate of decline over six months to signal a
recession, the New York group said.
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“A little bit of patience is probably appropriate,” said
Gary Stern, president of the Federal Reserve Bank of Minneapolis.
His comments on the economy came in a speech to a business group
in Bloomington, Minnesota. He said the economy may accelerate in
the second half of next year.
Microsoft Corp. said it may have lower sales growth, and Zale
Corp. is forecasting lower sales this quarter, citing the slowing
economy. Falling stock prices, rising jobless claims and a drop in
consumer optimism contributed to the decline in the Conference
Board’s index. The New York group uses 10 gauges of economic
activity to indicate the economy’s direction over the next three
to six months.
“As a general matter, our economy is doing okay,” Treasury
Secretary Paul O’Neill said earlier today. “We continue to look
at possible things that might be done to help it along.”
Stocks Rise
Stocks rose, erasing early declines, led by shares of Philip
Morris Cos. and Coca-Cola Co., suggesting demand for businesses
with products resilient to a slowing economy. The Standard &
Poor’s Index of 500 stocks rose 11.6 points, or 1.4 percent, and
the Dow Jones Industrial Average gained 170 points, or 2.1
percent, at 2:105 p.m. New York Time.
Economists had expected a 0.2 percent decline in the leading
indicators index after a previously reported 0.2 percent drop in
August, based on the median of 40 estimates in a Bloomberg News
survey.
“Except for the financial markets, there is little evidence
of a developing economic decline,” said Ken Goldstein, an
economist who compiles the report for the Conference Board. “A
stalling-out of growth is a more reasonable prospect than the
economy falling back into recession.”
The U.S. economy will grow at a 2.2 annual rate this quarter,
down from a projected 3.6 percent rate in the 2002 third quarter,
according to the latest Blue Chip Economic Indicators survey. Wal-
Mart Stores Inc., Kohl’s Corp. and Target Corp. had lower-than-
expected sales in September, which has reduced economists’
expectations for consumer spending during the November-December
holiday shopping season.
Zale, Microsoft
Zale, the largest North American jewelry retailer, said its
loss for the quarter that ends Oct. 31 will be larger than
forecast. Microsoft Chief Executive Steve Ballmer said the
company’s 26 percent increase in sales during the quarter that
ended on Sept. 30 may not be repeated in coming months.
“We’re not trying to say that we think the sales results of
our first quarter will be sustainable, it is kind of a one-time
anomaly,” Ballmer told an Australian television program.
Five of the 10 indicators the New York group uses to
calculate the index declined, and four rose. The group bases its
measurement on seven previously reported economic statistics and
estimates for three others.
Besides a drop in stock prices, an increase in jobless claims
and lower consumer expectations, a decline in factory orders for
business equipment also subtracted from growth. A narrower spread
between the yield on the 10-year Treasury note and the overnight
bank lending rate helped drag down the index.
Bloomberg News
