
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 2, 1990                   TAG: 9003023541
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                 LENGTH: Medium

ECONOMY REMAINS SLUGGISH

The government's chief economic forecasting gauge was flat in January, the Commerce Department said today in a further indication that the economy's current sluggishness will extend into midyear.

The lack of change in the Index of Leading Economic Indicators, designed to forecast economic activity six to nine months in advance, followed a revised 0.6 percent gain in December and a 0.1 percent advance in November. The index fell 0.4 percent in October.

Many economists had expected a slight increase in the January index.

Three of the 11 forward-looking statistics contributed to the gain, led by a sharp increase in building permits during the warmest January on record.

Others showing strength were slower business delivery times and an increase in the backlog of manufacturers' unfilled orders.

The biggest drag on the index in January was a decline in orders for consumer goods.

Other negatives were a drop in the money supply, a decline in plant and equipment orders, lower stock prices, a decrease in the price of raw materials, a drop in an index measuring consumer confidence and an increase in weekly unemployment

One indicator, the length of the average work week, was unchanged.

The various changes left the index at 145.3 percent of its 1982 base of 100. The index rose 0.8 percent from August through January after falling 0.7 percent the previous six months.

The December index originally was reported to have risen 0.8 percent, but was revised downward to 0.6 percent, largely because of lower orders for consumer goods.

Despite the sluggishness, recent surveys indicate that business executives and economists generally believe the Federal Reserve is driving the economy down the right road, steering it away from a recession while braking the growth of inflation.

Seventy-two percent of the professional forecasters responding to a poll by the National Association of Business Economists said the central bank was on the right track.

And 56 percent of the business leaders participating in a survey by the National Association of Manufacturers said Fed policies are "just about right."

But most of the business leaders and economists surveyed project continued sluggish growth in 1990 as the Fed keeps interest rates relatively high to slow the economy and keep prices under control.

Fed Chairman Alan Greenspan told Congress this week that the economy would avoid a recession, although it would grow only at a modest annual rate of 1.75 percent to 2 percent this year.

But he added: "Whenever you have economic growth as low as this, you are vulnerable."

Greenspan was referring to the latest report on the gross national product, released Wednesday, that showed the economy slowing in the fourth quarter of 1989 to a 0.9 percent growth rate, down from 3 percent in the third quarter.

by CNB