Top indicators see growth in '93 other signs bleaker

December 31, 1992|By Los Angeles Times

The nation's main gauge of the economy's prospects rose again in November, the government said yesterday, but other reports hinted that the fledgling recovery still has its share of trouble.

The Commerce Department said its index of leading economic indicators rose 0.8 percent last month, the strongest gain since February and the second increase in a row. The index, which measures 11 business components, is designed to forecast economic activity six to nine months in advance.

But in another report, the department said sales of new homes dropped a surprising 8.3 percent in November, after having fallen 8.2 percent in October. And although the Conference Board, a respected business-research group, said newspaper advertisements for new job openings rose slightly last month, it added that employers were not expected to start a hiring binge soon.

"The economy is definitely improving, but there are obviously still some weak spots," said Ted Keen, an economist with Economic Analysis Corp. in Los Angeles.

Eight of the leading index's 11 forward-looking indicators improved last month. A 16 percent rise in consumer confidence, as measured by a monthly University of Michigan survey, accounted for half the index's gain.

"There's hope and optimism in the country that things are going to get better," President-elect Bill Clinton said from Hilton Head, S.C., where he is vacationing. "What we have to do now is keep interest rates down and get growth going."

Mr. Clinton did not comment on whether yesterday's report lessened the need to follow through with his proposals to stimulate the economy with middle-class tax cuts and more spending on public-works projects.

But many analysts said the spate of upbeat economic reports might let the new president focus on reducing the deficit instead of pushing a stimulus package through Congress.

"The message for the new year is that the economy is up and running," said Allen Sinai, an economist at the Boston Co. "Given that the economy is up and running, do we need to give it a shot of adrenalin? The answer is, 'Maybe not, and if so, probably very little.' "

Most analysts shrugged off the 8.3 percent drop in new-home sales, noting that the Commerce Department has released its monthly sales figures and subsequently revised them upward later in each of the past 14 months.

The department said it would change its method of calculating sales, starting next month, to improve the report's accuracy.

"The housing market is still weak in some spots, but it's not as bad as Commerce says it is," said Gopal Ahluwalia, an economist for the National Association of Home Builders.

Overall, the department said, sales fell in the month to 565,000 annualized, from 616,000 the month before. The South, which includes Maryland, saw sales fall 18.5 percent, to an annual rate of 229,000. The Northeast jumped to 73,000, compared with 57,000 the month before. Figures are seasonably adjusted.

Meanwhile, the Conference Board said its index of help-wanted advertising rose to 94 last month, from 92 in October and 90 a year earlier.

The index, which measures the volume of ads placed in 51 major newspapers by employers seeking workers, is based on 100 being equal to the amount of advertising in 1967.

The business-research group said advertising volume fell 1.6 percent on the West Coast and 0.5 percent in Chicago and the surrounding area. Volume rose in all other regions, with a 10 percent gain in the area that includes New York and Pennsylvania leading the way.

Ken Goldstein, the group's chief economist, said advertising volume will not pick up soon because employers are not hiring despite signs of an economic rebound.

In another report, the Purchasing Management Association of Chicago said its monthly index rose to 59.75 percent in December, from 54.2 percent in November.

A reading below 50 percent signals a slowdown in Midwestern manufacturing; a reading above 50 percent suggests expansion.

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