November 20, 2001

Economy

Economic Outlook Improves Slightly From Weak Reading for September

A WALL STREET JOURNAL ONLINE News Roundup

NEW YORK -- A key gauge of future U.S. economic activity rose 0.3% in October, after a sharp decline in the preceding month when the terrorist attacks weighed heavily on the economy.

The Conference Board said Tuesday its index of leading economic indicators edged up to 109.4 in October, following a 0.5% decline in September and a 0.1% drop in August.

The decline in September was clearly exaggerated due to the terrorist attacks of Sept. 11, said Ken Goldstein, an economist with the New York research group. Economists were expecting no change in the October reading, according to a survey by Thomson Global Markets.

The index is designed to predict where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year.

Mr. Goldstein said the housing and labor sectors, two components of the index, continued to struggle in October. But that weakness was offset by a recent rise in stock prices and the Federal Reserve's rate-cutting campaign.

The central bank has cut rates 10 times this year to shore up the economy, and is expected to cut rates again when it meets next month. Even before the terrorist attacks, the economy had been struggling as stocks tumbled, layoffs mounted and corporate earnings sagged.

The group said seven of the 10 components of the leading index contributed to its increase in October: vendor performance, interest-rate spread, money supply, stock prices, manufacturers' new orders for consumer goods and materials, manufacturers' new orders for nondefense capital goods and consumer expectations.

The coincident index, which measures current economic activity, fell 0.2% to 116.5 in October. The index of lagging indicators, which reflects changes that have already occurred, slipped 0.3% in October to 103.6.

For information about subscribing, go to http://wsj.com