NEW YORK -- A barometer measuring U.S. economic growth improved for the third straight month during March, paced by stock market gains.
The Conference Board's Index of Leading Economic Indicators, designed to be a predictor of activity over the next half-year, rose 0.2 percent in March after climbing an unrevised 0.4 percent in February and 0.1 percent in January.
"Not only is the risk of a recession in the foreseeable future almost nil, but the economy is likely to expand at a brisk pace throughout 1998," said Michael Boldin, director of business cycle research at the Conference Board.
Signs that the U.S. economy isn't about to slow caused bond investors to fret. The Treasury's benchmark 30-year bond fell more than 1/2 point in late New York trading, pushing up its yield 5 basis points to 5.98 percent, on concerns that Federal Reserve policy-makers now are more likely to raise overnight borrowing costs to cool growth and keep inflation in check. The Dow Jones industrial average, which rose to a record Monday, fell 45.09 points, or 0.49 percent, to close at 9,147.57.
The wealth created by the stock market is helping bolster confidence and boosting spending, analysts said. "Money supply, stocks and confidence have been screaming," said Richard Yamarone, senior economist at Argus Research Corp. in New York.
Of the 10 indicators in March's LEI index, the money supply and stocks made the largest positive contributions, Conference Board figures show.
Other indicators that were a positive for the overall index included jobless claims, factory orders for consumer goods, vendor deliveries, and the spread between the overnight bank lending rate and the Treasury's 10-year note yield.
Indicators that were a negative reflection on the March LEI were the average factory workweek, building permits, orders for non-defense capital goods, and consumer expectations.
The Conference Board also reported yesterday that the index of coincident indicators, a gauge of current economic activity such as industrial production, rose 0.1 percent in March after increasing 0.3 percent in February. The index of lagging indicators, a gauge of past economic performance, rose 0.6 percent in March after rising 0.3 percent in February.
While the nation's gross domestic product, the total national output of goods and services, grew at a 4.2 percent annual rate in the first quarter, fresh evidence of more moderate growth has surfaced. Last week, the National Association of Purchasing Management reported that its main monthly index, a closely watched gauge of the country's factory output, fell to 52.9 in April from March's 54.8.
Also, construction activity posted its first decline in five months during March.
The Commerce Department reported that housing completions rose 2.5 percent in March to a seasonally adjusted annual rate of 1.488 million, after rising 10.4 percent in February.
"Slower U.S. growth seems sure to emerge," said John Auten, director of the Treasury's office of financial analysis, who said yesterday that the Treasury is forecasting 2.5 percent growth for the year. "Continued growth at a 4 percent rate hardly seems feasible, even on the most favorable assumptions for productivity performance."
One Federal Reserve official said he isn't so sure about a slowdown. "With activity already at a high level, clearly there is a risk that the economy could overheat at some point," said Alfred Broaddus, president of the Federal Reserve Bank of Richmond, Va.
Pub Date: 5/06/98