Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 16, 1995 TAG: 9507170135
SECTION: NATIONAL/INTERNATIONAL PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The Commerce Department is looking for a private company to take over its Index of Leading Economic Indicators and two companion barometers and publish the results each month.
The Clinton administration says this latest foray into privatization will save money and free some federal numbers-crunchers to pursue the more important task of refining other statistics.
Even private economists who applaud the idea warn there is a danger in having a profit-making company dispense a set of numbers with potential to move financial markets.
``You're the manufacturer of a number the market is going to trade on. It does raise some suspicions,'' said economist Maury Harris of PaineWebber Inc. He mentioned possible leaks to preferred customers before the figures are made public.
The Commerce Department takes extraordinary steps to assure against premature disclosure. On the morning when the report is to be released, financial news reporters are locked in a room for a half-hour until the official announcement time.
Sung Won Sohn of Norwest Corp., a Minneapolis bank holding company, is one economist who thinks the government is making a serious mistake by relinquishing control.
``Something needs to be done to the current index. It doesn't lead or indicate much,'' he said. ``But I'm concerned that turning it over to the private sector will damage its credibility.''
Officials insist they can protect the integrity of the index when it is awarded to a private firm.
``We're not auctioning off a brand name. We're finding a steward in whom the public will have trust,'' said Everett Ehrlich, the under secretary of Commerce for economic affairs.
While the Commerce Department has been threatened with extinction itself by a budget-cutting, Republican-controlled Congress, the decision to farm out the index was made earlier and appears unrelated. The department is engaged in a thorough overhaul of its economic record-keeping and putting the index into private hands is just a small step.
The agency hopes to free about $450,000 to devote to other chores. Unlike other government reports, the index is a compilation of published statistics and is not primary data.
Ehrlich said perhaps a half-dozen statisticians will have more time to measure the nation's economic output, increasingly difficult in an age of technological innovation and sophisticated services.
In Ehrlich's words, rather than count up haircuts, coal production and cereal output, the government's shopping cart now contains financial services, electronic devices and medical equipment. ``It's progressively harder to measure,'' he said.
Numerous private companies are bidding to take over the Index of Leading Economic Indicators. The government declined to say how many or what firms are interested.
The application deadline is July 28 and the Commerce Department plans to select a winner by Labor Day.
The bidding is not about money. Whoever gets the contract will be expected to pay the Commerce Department about $7,500 during a transition period while federal employees look over the shoulders of private analysts.
The winning company must convince the government of its trustworthiness and competence and perhaps comes up with ideas for improving the index.
The gauge, an outgrowth of work first published in 1938 by Arthur F. Burns and Wesley Mitchell, has come in for its share of criticism since the government began releasing the figures nearly 30 years ago. Private economists say it has missed major economic turning points - failing to foresee recessions or predicting ones that did not occur.
by CNB