A Pause That Perplexes?

By John S. McClenahen The Conference Board's index of leading economic indicators -- data that suggest what the U.S. economy is likely to be doing several months in the future -- held steady in June after a 0.6% gain in May. The index, which includes manufacturing hours and orders, stands at 112.4 (1996 = 100). To Jerry J. Jasinowski, president of the Washington, D.C.-based National Association of Manufacturers (NAM), this suggests that the gloom on Wall Street is out of step with improving conditions on Main Street. "Indicators of the real economy -- such as unemployment and manufacturing hours worked -- are improving" notes Jasinowski. "However, this expansion is being countered by a falling stock market that has amplified investor anxiety and dampened consumer expectations." NAM's president believes the U.S. economy may be in somewhat of a reversal of the 2001 recession, with U.S. exports and U.S. manufacturing improving while consumer spending is slowing down. Further stock market declines "could sour consumer sentiment more and lead to continued softening in consumer spending," Jasinowski says. "On the other hand, personal income, the foundation for sustainable consumer spending, has continued to grow at healthy rates during the last several months." Jasinowski's bottom line: "While the chances of a double-dip recession are very low, [the Conference Board] report suggests that consumer spending may be weaker in the next quarter than we previously expected."

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