Gauge: Economy Cooling, Not Contracting
By Mark Wilkinson
WASHINGTON (Reuters) - A key forecasting gauge for the U.S. economy logged its biggest increase in more than two years, indicating the economy is cooling off rather than tipping into a full-blown recession, a private research firm said on Thursday.
The Conference Board said the U.S. index of leading indicators edged up 0.8 percent in January after dropping 0.5 percent in the prior month. The January rise beat Wall Street expectations for a 0.3 rise.
``If you look at where the index has been for the past 12 months you sort of get this sense that it has been meandering and that the economy has cooled off,'' Conference Board economist Ken Goldstein told Reuters.
``But that's all that it has done -- it has cooled off, it's not in a recession and it's not going into a recession.''
Although the January gain was the largest since a 0.9 percent jump in November 1998, the Conference Board said the rise was not enough to recoup the losses of the past three months.
The January reading was affected by a technical adjustment made by the Board, which put the index in sync with two other measures it publishes -- to so-called lagging and coincident indices.
STILL ``BIG CHANGE''
Without that change, January leading indicators would have risen by 0.4 percent, which is still a ``big change,'' Goldstein said. He added that when the rise is put in the context of the index's performance over the past year, it reflects an economy that is not stalling.
Goldstein also said the U.S. economy's slowdown in the fourth quarter of 2000 was exacerbated by seasonal factors like bad weather and that the economy is now ``catching up.''
Diane Swonk, chief economist for Bank One in Chicago, agreed that heavy snowstorms in December, particularly in the Midwest, contributed to slower deliveries and factory orders.
She also said that the use of the infamous ``R-word'' to bolster support for a substantial tax cut had helped exaggerate the extent of the economic slowdown.
Manufacturers caught by surprise by a cooling in demand in the second half of last year have had to cut output sharply to bring their inventories into better balance with sales.
``Plagued by rising energy prices, high interest rates and excess inventories, manufacturing output contracted by more than 2 percent in the fourth quarter of 2000,'' National Association of Manufacturers economist David Huether said in a statement.
``While the inventory correction will likely continue into the second quarter, today's numbers are the first indication that the downturn may ease later in the year.''
RECOVERY WELL WITHIN SIGHT
``(The economy) is not going to take off like a rocket, but it's not going to fall off the cliff,'' Goldstein said.
Swonk said she thinks the recovery has already begun in some sectors.
``There's no question that we've hit an inflection point,'' Swonk said, adding that other data had already begun to point to an eventual recovery. ``Retail sales are up stronger in January than they were in December and vehicles deliveries already picked up.''
Retail sales for January rose 0.7 percent, after a 0.1 gain in December, with sales of autos and other long-lasting expensive goods posting strong gains.
``The reality is that consumers' actions speak louder than words,'' Swonk said, adding that although the current financial situation of consumers has deteriorated slightly, it still remains ``well within expansion territory.''
Swonk expects the first quarter of this year to be among the weakest in the past few years, but with inventories and sales coming into better alignment, she thinks recovery is in sight.
In addition, growth in the second half of 2001 should be bolstered by the recent ``mini-boom'' in the housing sector in recent months amid low interest rates, Swonk said.
Building permits for future construction posted a whopping 12.6 percent rise in January after 5.7 percent drop in December, while groundbreaking for new homes rose 5.3 percent last month.
Goldstein believes that the Federal Reserve's recent slashing of interest rates and a likely tax cut will combine to give the economy a strong boost.
``When you take an economy that's really not that bad and you give that much monetary stimulus and that much fiscal stimulus it's like you taking a fourth cup of coffee,'' he said.
<center>
<HR>
</center> |
Thread-Ansicht
Mix-Ansicht
Reihenfolge
Thread gesperrt
