Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, November 3, 1993 TAG: 9311030038
SECTION: BUSINESS PAGE: B7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
"People have been putting off purchases for some time . . . but now they're saying, `Enough is enough. I need a new home or a new car and now's the time to do it because the interest-rate environment is so good,' " said economist Mark Zandi of Regional Financial Associates in West Chester, Pa.
The Commerce Department's Index of Leading Indicators rose 0.5 percent, signaling continued moderate growth into 1994.
September was the fourth month without a decline. It followed a 0.9 percent gain in August, no change in July and a 0.1 percent rise in June.
Tuesday's reports fit with analysts' belief that the economy, after lapsing in the first half of this year to an annualized growth rate of 1.4 percent, is expanding at a moderate rate of about 3 percent.
The leading-index report confirms "a healthy picture for the next few quarters," said Alicia H. Munnell, assistant Treasury secretary for economic policy.
"We feel we are in a sustainable recovery with constant growth, high enough to reduce the nation's unemployment while keeping inflation low," she told a group of Wall Street executives who advise the department on its securities sales.
Economists said growth is being driven by interest rates hovering at 25-year lows. That makes it cheaper to buy homes and durable goods such as automobiles, furniture and appliances and easier for businesses to buy new computers and machinery.
Although rates have been declining for four years now, factors that have blunted their effect - such as sluggish job growth and the buildup of consumer and business debt - are starting to ease, analysts said.
"It hasn't happened in just the last few weeks, but now we're getting a lot of data bunched together, all pointing in the same direction," said economist Paul W. Boltz of T. Rowe Price Associates in Baltimore.
While almost no economist is predicting a relapse next year, some see risks that could squelch the improvement under way.
Both Europe and Japan are struggling against severe economic problems, cutting U.S. export sales.
"There's no question things are better now than they were in the first half of the year . . . The big question is: How sustainable is it? . . . Is this a one-time upward spike based on interest rates?" said economist Lawrence Chimerine of the Economic Strategy Institute, a Washington-based think tank specializing in trade and competitiveness issues.
The leading index is intended to forecast the economy six to nine months in advance.
Six of its forward-looking indicators were positive in September. In order of their impact, from largest to smallest, gains were recorded in the inflation-adjusted money supply, new orders for consumer goods, building permits, stock prices, consumers' expectations and the inflation-adjusted backlog of orders at factories for durable goods.
The negative indicators, from greatest to smallest impact, were: a speedup in business delivery times, a sign of decreased demand; a drop in contracts and orders for new commercial buildings and business equipment; a rise in applications for jobless benefits; and a decline in the prices of raw materials, another sign of slacker demand.
One indicator, the average workweek for factory workers, was unchanged.
The various changes left the index at a seasonally adjusted 153.6, up 3.3 percent from a year ago and 1.3 percent from three months ago.
by CNB