THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, October 30, 1996 TAG: 9610300424
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: NEW YORK LENGTH: 53 lines
Fresh evidence pointing toward a cooling economy came Tuesday with new reports showing a slide in consumer confidence from September and only a slight rise in worker pay during the summer.
Together, the reports provided signs of economic weakness and low inflation, two factors that could prompt the Federal Reserve to delay raising interest rates at its Nov. 13 meeting.
``Bad news is good news in this case,'' said Anthony Chan, senior economist at Banc One Investment Advisors in Columbus, Ohio. ``The economy has the prospects of slowing down enough that the Fed will not have to make any sort of adjustment.''
Bond and stock prices rose shortly after the news was released and the Dow Jones industrial average was up more than 50 points at midday.
The Conference Board, a New York-based private research group, said its Consumer Confidence Index fell by 5.6 points to 106.2 this month. The index jumped 5 points in August and 6.9 points in July, hitting a six-year high before weakening slightly in September.
Despite the decline, the Conference Board and economists are still predicting strong holiday sales.
The Labor Department reported employment costs rose 0.6 percent in the third quarter, compared with 0.8 percent in the second and the smallest gain since a 0.6 percent increase in the third quarter of 1995.
For the 12 months ended in September, it rose 2.8 percent, down slightly from 2.9 percent during the year ended in June.
The index is regarded as the best measure of labor costs, which represent two-thirds of a product's price.
``We continue to see no sign of inflation in regard to employment costs,'' Labor Secretary Robert B. Reich said in an interview. ``Remarkably, total employment costs continue to be about the same as inflation.''
The reports come as financial markets scour new economic data for indications of whether the Fed will likely raise interest rates in November.
Interest rates fell in the inflation-sensitive bond market after the Labor Department report and declined further on the consumer confidence figures. Yields on 30-year Treasury bonds dropped to 6.71 percent, a two-month low, from 6.83 percent late Monday. Stock prices were higher at early afternoon, after see-sawing for much of the morning session.
The consumer confidence index, calculated from a base of 100, is derived from responses to questions sent to 5,000 households nationwide, polling them on matters ranging from job availability to home-buying plans.
The Conference Board reported that consumers' opinion of current conditions was down 3.9 points at 124.6, and expectations for the next six months also fell to 94, down 6.7. While both components were much lower from the summer months, they were significantly higher than a year ago.
KEYWORDS: ECONOMY by CNB