Index of economic indicators posts third increase in row, U.S. reports.

RECESSION'S END MAY BE IN SIGHT

May 31, 1991|By Jon Morgan

The federal government's main forecasting gauge for the economy posted its third monthly increase in a row in April, boosting hopes that an end of the recession could be near.

Statistics released today by the Commerce Department showed an unusually broad-based improvement in the Index of Leading Economic Indicators. The index of 11 key economic statistics rose by 0.6 percent after a revised rise of 0.7 percent in March and a 1.2 percent climb in February.

Other economic data released today and yesterday also offer some fodder for optimists: personal in come of Americans is up slightly, new home sales are rebounding as are orders to the nation's factories. The orders rose in April for the first time in six months, posting a 1.8 percent gain.

At the same time, however, consumer spending has weakened and mortgage delinquencies are still bad, especially in the Northeast.

Meanwhile, state officials report some early, if unsteady, signs of recovery in Maryland's economy. Average weekly claims for new job less benefits peaked in February at about 8,000 and are now down to about 3,500, said Ann Franklin, an economist with the Department of Fiscal Services, the auditing arm of the General Assembly.

Franklin and other economists caution that the data is still incomplete and that a recovery in Maryland could lag behind the nation as a whole. Many jobs in the state are dependent on federal spending -- both defense and civilian -- which is still under pressure as a result of the federal budget crunch.

"I think Maryland will come out similar to the nation as a whole, but the recovery will probably not be that strong," Franklin said.

Sales-tax receipts, another important gauge of economic activity, have yet to show any improvement in Maryland, she said. For the seventh consecutive month, the receipts were down from year-earlier levels in March, the most recent figures available. The state treasury, suffering from persistent shortfalls, is not likely to see any relief at least until fall, she said.

Especially important in looking at the index released today is the increase in a number of key components, Franklin said. Earlier this year the improvement had been concentrated in stock prices and consumer confidence -- things that could have been dismissed as post-Gulf War euphoria, she said.

"It seems things are turning around. Three solid months of increases are good news," she said.

Six of the 11 components of the Commerce Department's index improved: more manufacturers' orders for consumer goods, lower claims for state unemployment insurance benefits, slower

vendor deliveries, higher stock prices, a longer work week and increased applications for building permits.

Four indicators were negative: weaker consumer expectations, lower plant and equipment orders, a smaller backlog of unfilled orders and a bigger money supply. One indicator -- commodity prices -- was unchanged from March.

Pradeep Ganguly, associate director of research with the Maryland Department of Economic and Employment Development, said that the speed and timing of Maryland's recovery is uncertain.

The leading indicators index is designed to reveal the economy's di

rection six to nine months in advance. The April improvement was stronger than economists' forecasts of a 0.4 percent rise.

"This is the classical sign of the economy at a turning point," said Stephen Roach, senior economist at Morgan Stanley in New York.

"In the last 40 years, we've never had three months in a row [of gains in the leading indicators] without the economy being at a turning point or already have made a turn," he said.

However, Gwen Wagner, an economist with T. Rowe Price in Baltimore, said, "I'm still very cautious about the economy. I wouldn't want to read too much into these three numbers."

The index was flat in July last year -- the month the National Bureau of Economic Research has officially pegged as the beginning of the current recession -- and dropped for six successive months until February as the economy went into the doldrums and unemployment rose.

Meanwhile, the Northeast and the South, two regions hard hit by the recession, recorded the biggest increases in mortgage delinquency rates during the first three months of the year, according to a national survey released yesterday by the Mortgage Bankers Association.

In Maryland, 3.92 percent of mortgage holders were at least 30 days behind in payments for the first three months of 1991.

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