U.S. Economic Gauge Signals
Thu Sep 23, 2004
By Glenn Somerville
WASHINGTON (Reuters) - A key gauge of future
economic activity weakened for a third straight month in August
as costlier oil spread worry among consumers and businesses,
a report from a business research group showed on Thursday .
The Index of Leading Indicators, issued by
the Conference Board, fell 0.3 percent in Aug to 115.7 after
a matching 0.3 percent decline in July and a 0.1 percent drop
in June, raising questions about the durability of the economy's
The index measures a basket of 10 indicators
of performance from consumer confidence to applications for
new building permits, and is intended to signal the economy's
direction three to six months down the road.
Its steady decline contrasts with a view expressed
on Tuesday by Federal Reserve policymakers, who voted to raise
U.S. interest rates for a third time in three months, that economic
output has "regained some traction" since summer.
"We doubt this signals an imminent further
sharp downturn in growth but the data make uncomfortable viewing
and are not consistent with the Fed's view that the economy
is regaining traction," said economist Ian Shepherdson
of High Frequency Economics Ltd. in Valhalla, N.Y.
Separately on Thursday, the Labor Department
said the number of applicants for an initial week of jobless
aid climbed a sharper-than-expected 14,000 last week to 350,000.
But it attributed most of the gain to disruptions caused by
a series of hurricanes that hit Florida and other parts of the
Southeast over the past month.
WORRIES SPREAD ON OIL
Oil prices were just over $48 a barrel on
Thursday, down slightly on speculation the U.S. government might
release some crude from its huge reserves but still within sight
of an Aug. 20 record high of $49.40. That has taken money from
consumers' pockets that might be spent on other goods and eventually
will filter into production costs.
"There is concern about weak consumption
and the pace of wage and salary increases," said Conference
Board economist Ken Goldstein. "Consumers worry about their
wages and salaries which could limit spending. Businesses worry
about their ability to raise prices and to cover rising costs."
The report on initial jobless claims was worse
than anticipated by private-sector economists who had foreseen
a smaller total of 340,000.
"The increase is ... mostly hurricane-related,"
a department spokesman said. "It can be related to the
recent hurricanes in Florida."
A department spokesman said last week's claims
number primarily reflected Hurricanes Charley and Frances and
that Hurricane Ivan, which struck a week ago and caused widespread
damage, has yet to make its presence felt on claims.
Analysts say the claims data have been hard
to interpret in recent weeks. Large numbers of people have faced
repeated evacuations from Florida and other parts of the Southeast
during the past month, in some cases delaying filing of claims,
and the volatility may persist for several more weeks.
Financial markets did not respond directly
to the latest economic indicators but remained weighed down
by doubts about the eventual effect that costlier oil will have
on the pace of global growth.
The Dow Jones industrial average was down
more than 70 points, or 0.7 percent, in early afternoon while
the Nasdaq Composite Index was slightly in negative territory.
Bond prices also were lower and the dollar was broadly weaker
against other major currencies.
A four-week moving average of initial jobless
claims, which irons out short-term volatility, edged up to 341,000
from 339,000 -- a level economists associate with moderate hiring.
The number of people who remained on state
unemployment rolls after claiming an initial week of jobless
claims edged up to 2.88 million.