Reports send mixed signals on economy


Published: Friday, January 24, 2003 at 6:01 a.m.
Last Modified: Thursday, January 23, 2003 at 10:37 p.m.
NEW YORK - Two reports painted a hazy picture of the economy Thursday, suggesting that economic activity is gaining momentum but is being stymied by business and investor concerns over a war with Iraq.
The Index of Leading Economic Indicators rose in December for the third straight month, buoyed by increases in building permits for new housing and manufacturers' new orders for consumer goods, according to the Conference Board, a private industry group.
The index measures where the overall U.S. economy is headed in the next three to six months.
Separately, the Labor Department reported the number of Americans filing new claims for unemployment benefits rose by 18,000 last week, signaling that the weak economy is still prompting companies to lay off workers to cut costs.
The Labor Department said a total of 381,000 workers filed for jobless benefits last week, compared with a revised figure of 363,000 the previous week.
Economists had been predicting an increase in jobless claims since they fell by an unexpectedly large 30,000 in the previous week.
Even though the index of leading economic indicators rose just 0.1 percent in December, it comes after a 0.5 percent jump in November and a 0.2 percent increase in October. The index is now at 111.3 - just shy of its May 2002 level when it began its summer descent. Analysts had expected the index to be flat in December. It stood at 100 in 1996, its base year.
"Three consecutive increases in the Leading Economic Indicators suggests that the economy might turn in a better performance in the first quarter of 2003 than it did in the second half of last year," Conference Board economist Ken Goldstein said.
Of the 10 indicators that make up the index, eight were positive, including housing permits, average manufacturing workweek and consumer expectations.
The two negative factors weighing on the index in December were stock prices and unemployment figures.
"Many businesses are still shell-shocked and now have to worry about the possibility of war," said Sohn. "As a result, business people are unwilling to make long-term commitments such as hiring people, and investors are too cautious and not willing to dive into the stock market."
The government reported earlier this month that the nation's jobless rate remained stuck at an eight-year high of 6 percent in December. Many analysts predict the unemployment rate will peak at about 6.5 percent in early summer, before the economy starts to pick up and create jobs again.
Fed policy-makers will hold their first meeting of the new year next Tuesday and Wednesday. Most analysts believe they will leave the overnight borrowing rate for banks unchanged at 1.25 percent.
Labor Department economists cautioned that this week's 18,000 increase in jobless claims could be revised significantly next week because Monday's federal holiday provided less time to collect data.

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