Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, March 4, 1992 TAG: 9203040080
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
President Bush, under attack from presidential candidates from both parties for his handling of the economy, welcomed the reports, saying, "It's nice to have some encouraging news."
But analysts agreed that any recovery would be anemic, unlike the robust revivals that followed most other post-World War II recessions. And Federal Reserve Chairman Alan Greenspan cautioned that "extraordinary forces" still make the future uncertain.
"It looks like the economic recovery is under way," said economist Sung Won Sohn of the Norwest Corp. in Minneapolis. But he added, "it will be a very modest, gradual one."
The Commerce Department said its Index of Leading Economic Indicators jumped 0.9 percent in January after two straight declines. Seven of the 11 forward-looking statistics posted gains, led by soaring stock prices.
The index is designed to forecast economic activity six to nine months in advance. Three consecutive declines are viewed as a fairly reliable - although not infallible - signal of an approaching recession.
The report also showed the November and December drops were not as sharp as previously thought. They were revised upward to 0.2 percent for each month from the 0.3 percent declines originally estimated last month.
"This tells us that [the economy] is not likely in fact to fall back into another recession . . . or a double-dip," said Mark Obrinsky, an economist with the Federal National Mortgage Corp.
Gordon Richards, an economist with the National Association of Manufacturers, said the report is "consistent with other evidence pointing to a gradual recovery in the second" quarter.
For the year, the Bush administration and many economists are forecasting growth of 1.5 percent compared with an average of 6 percent during the first year of recovery from other post-World War II recessions.
In a second report, the departments of Commerce and Housing and Urban Development said sales of new homes shot up 12.9 percent in January, the steepest advance in a year. It was the third increase in four months and more than wiped out a 4.6 percent decline in December.
Except for the Northeast, where sales were unchanged, all regions posted advances, including a huge 63 percent gain in the Midwest.
Analysts said the report was another sign the housing industry had assumed its traditional role of leading the economy out of the recession with its spillover effect on sales of appliances and other home furnishings.
Greenspan cited the big jump in housing activity as one reason he, too, believed the economy was beginning to show promise of mounting a sustained recovery.
But he cautioned there was "an exceptional measure of uncertainty to the current picture" because of unusual forces such as high consumer and business debt burdens which were holding back growth.
Greenspan said the Fed's past rate cuts were "clearly working. But what is not clear is whether what we are seeing at this stage will create a self-sustaining economic recovery."
Greenspan once again said the central bank stood ready to do more if the expected economic rebound does not materialize. He said he was not convinced that "we may not need some insurance" in the form of further rate cuts.
"It appears as though there's a little bit of strength out there," Joseph Ronning, an analyst with Brown Brothers Harriman Inc., said Tuesday of retail sales. But, he added, "Nobody's beating down the doors."
Besides stock prices, other indicators boosting the leading index were increased orders for new plants and equipment, increased building permits, rising prices for raw materials suggesting increased demand, rising orders for consumer goods, stronger growth in the money supply and fewer initial claims for unemployment insurance.
Those were offset somewhat by a shorter work week, a decline in an index measuring consumer confidence, faster delivery times and a decrease in unfilled factory orders that suggested slack demand.
The various changes left the index at 146.5 percent of its 1982 base of 100. The index had risen 0.6 percent from August through January, compared to 4.9 percent the previous six months.
by CNB