New York, September 23--The Conference Board, a private research group, reported Thursday that its composite index of leading indicators fell by 0.3% to a reading of 115.7 in August, from the revised 0.3% decline seen the month before.
August's reading was in line with what economists expected. The index was equal to 100 in 1996.
The Conference Board attributed August's weakness to a variety of factors, although it did note that the last three months of negative readings "have not been long enough or deep enough to signal an end to the upward trend in the leading index underway since March 2003."
Still, "there is concern about weak consumption and the pace of wage and salary increases," said Ken Goldstein, economist with the Conference Board, in a statement. "Businesses worry about the ability to raise prices and to cover rising costs," he added.
The report noted that only three out of the 10 indicators making up the overall index rose in August, led by manufacturers new orders for consumer goods and materials, the money supply, and weekly unemployment insurance claims. The negatives were driven by interest-rate spreads, building permits, and consumer-confidence levels.
In the report, the Conference Board painted a mixed picture of the economy's immediate and past circumstances. The research group's coincident index rose by 0.2% to 117.8, the same increase that was seen in July. The composite index of lagging indicators, however, decreased by 0.1% to 98.2, after the 0.6% gain reported for the prior month.
The Conference Board's report comes just days after the Federal Reserve raised interest rates for the third time since June. The Fed based much of the need to nudge rates up on Tuesday on an economy that "appears to have regained some traction," along with employment conditions that "have improved modestly." The Fed also offered up a benign view of the current state of inflation.
The Fed's actions, however, are not being received all that well by the bond market, which has rallied even as the Fed has tightened. Bond traders and investors, along with a number of economic analysts, have questioned the Fed's optimism over the economic outlook. They've pointed to the not particularly robust hiring seen over recent months, along with a drop off in consumer spending. Also, oil prices continued to remain high, and that acts as a further drag on growth.
Many now believe that the Fed has at best one more interest-rate increase to make this year, and that it may then move the sidelines and refrain from further tightenings for a stretch, as it takes stock of the economy's performance from a vantage point of more normal interest-rate levels.
