Economy
Economic activity index declines for third straight month
By Siobhan Hughes / Bloomberg News
WASHINGTON -- The U.S. index of leading economic indicators fell in December for a
third straight month, suggesting the economy will slow further and reinforcing
expectations for Federal Reserve interest-rate cuts next week.
The Conference Board's index, a gauge of economic activity over the next three to
six months, fell 0.6 percent last month after declining 0.4 percent in each of the
prior two months. December's drop reflected a rise in layoffs and declines in consumer
confidence and the number of factory hours worked.
The report suggests "more moderation in economic activity in the first half of
2001," said Ken Goldstein, a Conference Board economist. Still, he sees "no recession
looming."
Stocks fell on signs of cooler growth and after Dell Computer Corp. said profit
this quarter will disappoint investors. The economy slowed in the third quarter of
last year to a 2.2-percent annual growth rate from a 5.6-percent second-quarter pace.
Growth in the final three months of the year was probably a little faster than in the
third quarter -- a 2.5-percent rate, according to analysts surveyed by Bloomberg News.
That adds to the likelihood that Fed policymakers will cut their benchmark
overnight lending rate when they meet Jan. 30-31. The implied yield on federal funds
futures for February delivery, tied to next week's meeting, is 5.53 percent -- almost
a half-percentage point below the Fed's current target of 6 percent. Fed officials cut
the overnight rate by a half-point on Jan. 3, citing concern about the weakening
economy.
December's decline in the leading indicators index was the largest since January
1996 when it fell 0.7 percent. The Conference Board uses previously reported economic
statistics to compile the index.
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