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

DATE: WEDNESDAY, May 2, 1990                   TAG: 9005020536
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

ECONOMIC GROWTH FORECAST

The gain in the Index of Leading Economic Indicators, designed to forecast economic activity six to nine months in the future, meant the gauge nearly regained the 1.0 percent loss it suffered in February.

It was the steepest increase since a 1.6 percent gain in June 1988. Before dropping in February, the index had risen for three straight months.

But while the gauge was up in March, some analysts were concerned that rising inflation, if it does not force the Federal Reserve to increase interest rates, certainly will not encourage the central bank to lower them.

High rates would slow further the already sluggish construction, auto and manufacturing sectors of the economy.

"We're looking for a slowdown in activity in the second and third quarters due primarily to high interest rates," said Paul Getman, an economist with Regional Financial Associates in West Chester, Pa.

"We'll have an extremely sluggish construction sector and lackluster activity elsewhere, including business investment, which has been pretty good," he added.

Indeed, construction, which relies on low-cost loans, slowed even before the start of the second quarter. The Commerce Department reported on Tuesday that construction spending dropped 1.4 percent in March, its steepest decline in more than a year.

Six of the 11 forward-looking statistics contributed to the increase in today's index, led by a gain in new plant and equipment orders.

Other positives were an increase in the price of raw materials, an increase in orders for consumer goods, higher stock prices, slower business delivery times and a drop in weekly unemployment claims.

Negatives included a decrease in building permits, a decline in the backlog of manufacturers' unfilled orders and a drop in the money supply.

Two of the components were unchanged: the average workweek and an index measuring consumer confidence.

The various changes left the index at 145.2 percent of its 1982 base of 100. The index edged up 0.1 percent from October through March on top of a 0.2 percent gain the previous six months.

Although many analysts see slow growth ahead, there is virtual unanimity that the economy has avoided a recession.

"The business cycle trough is pretty much behind us," contended Kermit Baker, director of economics at Cahners Economics in Newton, Mass. "Any risk of recession pretty much ended with the first-quarter [GNP] report. You're not going to hear too many recession forecasts cropping up over the next few months."