Economic slowdown may be near, index suggests
The Boston Globe --Jul. 23
Jul. 23--After nearly a year of strong growth, the US economy may slow in the coming months, according to economic data released yesterday.
The decline, the first since March 2003, is the latest in a series of reports
showing the economy slowing in June. Job growth slowed dramatically in June,
while retail sales and factory orders fell. Stocks have slid, too, amidst
concerns that profits will slow along with the economy.
Yesterday, the Dow Jones industrial average dipped below 10,000 before
rebounding to close at 10,050.33, up 4.20 points from Wednesday. The
technology-heavy Nasdaq Composite index rose 14.69 points to close at 1,889.06.
Despite the weaker than expected data for June, many economists, including
Federal Reserve chairman Alan Greenspan, say that the recovery remains on track.
Earlier this week, Greenspan told Congress that the slowdown in June appears
temporary, caused in part by soaring gasoline prices that cut into consumer
spending. Economists expect gas prices to moderate in coming months.
Greenspan, in his congressional testimony, also reiterated the Fed's
intention to raise interest rates gradually, another indication that policy
makers expect the economy to expand in coming months. The Fed raises rates when
the economy is growing as a way to prevent inflation, and cuts them to spur
growth when the economy shows signs of weakening.
Ken Goldstein, an economist at the Conference Board, said it's not unusual
for the leading indicators index to fluctuate from month to month.
"It's not unusual to get a bump in the road," said Goldstein,
"still get continued strong growth in the next few quarters."
The apparent slowing of the economy in June has not been all bad, either.
Bond investors, who see the slower growth as allowing the Fed to keep rates
lower for longer, have reacted by pushing yields lower on long-term bonds. As a
result, mortgage rates, which are tied to long-term bonds, have fallen recently.
Yesterday, Freddie Mac, the government-created mortgage company, reported
that the average rate for a 30-year fixed mortgage fell below 6 percent in the
last week.
James O'Sullivan, an economist at UBS AG in Stamford, Conn., agreed that the
slowdown in June appears temporary. The trend in the leading indicators over the
past few months are "signaling solid growth," he said.
-----
To see more of The Boston Globe, or to subscribe to the newspaper, go to http://www.boston.com/globe
.
(c) 2004, The Boston Globe. Distributed by Knight Ridder/Tribune
Business News. For information on republishing this content, contact us at (800)
661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail
reprints@krtinfo.com. FRE, UBS,