
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, March 2, 1991                   TAG: 9103020276
SECTION: BUSINESS                    PAGE: A-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

SMALL DECLINE IN INDICATORS HOPEFUL SIGN

The government's forecasting gauge of future economic activity fell 0.4 percent in January, its sixth straight drop, but some analysts said the relatively moderate decline signaled a mild recession.

"It is telling us that the recession is not going to be deep because the extent of the declines is not that great," economist Robert Brusca of Nikko Securities Co. International said of the Commerce Department's Index of Leading Economic Indicators. "It may be heralding a shallow recession."

Gilbert Benz, an economist with the Swiss Bank Corp. in New York, concurred, saying that the index "does project a relatively mild recession."

Because the index is designed to forecast economic activity six to nine months in advance, however, Benz said, "we cannot expect any sustained improvement until May or perhaps June."

The Bush administration, which also projects a mild contraction, agreed. Chairman Michael Boskin of the president's Council of Economic Advisers told reporters after a congressional appearance Friday, "We expect the economy will be rebounding sometime toward the middle of the year."

Also on Friday, the National Association of Purchasing Management said its monthly index of business activity indicated the recession was ebbing. Its index rose to 38.5 percent last month from 37.7 percent in January, but was still below the 44 percent level at which the association considers the overall economy to be in a decline.

The Commerce Department said the string of declines in the leading indicators, which included a revised 0.1 percent drop in December, matched the six consecutive drops from May through October 1984. The December index first was reported to have edged up 0.1 percent.

The index has not advanced since an anemic 0.1 percent gain last June. It was unchanged in July.

Benz said the index would have to fall 0.8 percent to 1.5 percent a month to forecast "a relatively severe recession." During the six-month decline, the index has tumbled an average of just 0.8 percent.

Only five of the 11 forward-looking components were positive in January, including an index measuring consumer confidence. Analysts expect this index to improve even more following the outcome of the Persian Gulf War.

Nevertheless, many economists question whether improved confidence will translate into an early end to the recession because of rising unemployment and falling incomes.

And economist Gordon Richards of the National Association of Manufacturers said, "There are other factors that will keep the economy in a slump until midyear."

One of those factors includes the construction industry, which posted another decline in January.

In a second report Friday, the Commerce Department said construction spending fell 2.6 percent in January to a seasonally adjusted annual rate of $396.6 billion, its lowest level in four years. It was the 10th consecutive monthly drop.

by CNB