A private sector group’s index of leading economic indicators dropped less than expected in February, but its broad decline of the past 19 months persisted and is unlikely to end until next year.
The New York-based Conference Board’s monthly forecast of economic activity fell 0.4 percent last month. Economists surveyed by Thomson Reuters expected a 0.6 percent decline.
Still, the Conference Board on Thursday also lowered estimates for the previous two months, saying leading indicators rose just 0.1 percent in January and slipped 0.1 percent in December. The earlier estimates were for gains of 0.4 percent in January, and 0.2 percent in December.
The index is designed to forecast economic activity in the next three to six months, based on 10 components that include stock prices, money supply, jobless claims and building permits.
“The economy has still not hit bottom,” said Stuart Hoffman, chief economist at PNC Financial. The index is designed to give a “sneak peek” at the next several months, and “right now the leaders are saying there’s still no light seen at the end of the tunnel.”
In the six-month span through February, leading indicators fell 2.1 percent. That’s faster than the drop of 1.6 percent in the six months through January.
However, the Conference Board said while indicators that make up its index have been trending lower since July 2007, the pace of decline has moderated in recent months.
“Financial market volatility remains strong, and the credit market freeze is relenting very slowly,” Ken Goldstein, economist at Conference Board, said in a statement. “A return to strong growth will not likely occur until 2010.”
Four of the 10 indicators posted declines in February.
The index’s worst performer was average weekly initial jobless claims ? which dropped to 646,000 last week, according to the Labor Department, but rose to a more than 26-year high of 654,750 when averaged over the past four weeks.
Mass layoffs continue. FedEx Corp. said Thursday it’s planning an undisclosed number of job cuts as the company reported its fiscal third-quarter profit dropped 75 percent amid severe weakness in the global economy. The Memphis, Tenn.-based company, often seen as a bellwether for the U.S. economy, also plans to scale back some workers’ hours and wages.
Nationwide, unemployment stands at 8.1 percent, the highest rate in more than a quarter-century.
Other factors dragging down the index included stock prices and the index of consumer expectations.
The leading indicators’ biggest positive was the “interest rate spread,” or the difference between the interest rates for 10-year Treasurys and the benchmark federal funds rate ? which the Federal Reserve now has between zero and 0.25 percent.
The Fed on Wednesday kept that key rate at a record low and also moved to lower long-term rates by announcing it would buy up $300 billion worth of long-term government bonds and up to $1.25 trillion on mortgage-backed securities guaranteed by Freddie Mac and Fannie Mae.
Other positive contributors to the index included the real money supply, building permits and manufacturers’ new orders.
Copyright 2009 The Associated Press.