Flooring News and Information

Washington, DC, Nov. 20—The U.S. index of leading economic indicators, a key forecasting gauge for the U.S. economy, rose 0.3% in October after recording its largest decline in five years in September, when it plunged 0.5%. The Conference Board, a private research firm that produces the report, said that the country is in a recession and may not bottom out until spring of 2002.

"The indication is that we're in a slowdown, a mild recession," said Ken Goldstein, the board's chief economist. "The good news is that it might not get worse than it is, but I don't see it getting any better at least until the spring."

The October rise was above the expectations of most Wall Street economists, who had forecast the index to remain unchanged. The index's increase, however, along with other recent positive economic data, made the current health of the U.S. economy appear better than it really is, Goldstein said.

On Tuesday, the Commerce Department reported that the U.S. trade deficit narrowed by the largest amount on record in September. The Commerce Department last week issued data showing a record surge in retail sales in October, in part triggered by cheap financing for new cars.

Goldstein said that zero financing offers from auto manufacturers and retailers have indeed encouraged consumers to purchase new cars in October, but that those retail numbers could fall into next year.

"Chances are we will see a drop off in car sales in December and January because consumers who had planned to buy a new car in December and January may have taken advantage of zero financing plans in October," he said.

Retail figures might also take a hit from a possible slump in consumer confidence, Goldstein said, as fears could mount over higher unemployment figures. The unemployment rate jumped to 5.4% in October from 4.5 in July, according to data from the Labor Department.

The coincident index, which gauges current economic trends, fell 0.2% in October after being unchanged the prior month, signaling a recession.

The lagging index, which measures past trends in the economy, fell 0.3% last month after a 0.2% drop in September, reflecting the marked sluggishness of economic activity in recent months.

Seven of the ten components that make up the leading indicators index rose in October, led by slower deliveries, the treasury yield curve, the money supply and consumer expectations. The remaining three components, initial jobless claims, the average workweek and building permits, fell.