Mixed Signals On U.S. GDP Growth

The Conference Board's index of leading economic indicators for the U.S. fell three-tenths of a percentage point in January, suggesting that the economy will continue to expand during the next three to six months but more slowly than its average annual inflation-adjusted growth rate of about 3.5%. The New York-based business research group's U.S. index now stands at 115.6 (1996=100). The index increased three-tenths of percentage point in both Nov. and Dec. 2004.

The Conference Board index is consistent with the latest quarterly economic forecast from the Manufacturers Alliance/MAPI, an Arlington, Va.-based business research and public policy group. It projects real GDP growth of 3.4% this year and 3.3% in 2006, figures that are unchanged from its previous forecast in Nov. 2004.

The alliance continues to expect manufacturing to outpace the overall economy this year and next, although not by as much as it forecast three months ago. Industrial production is now expected to advance 3.5% this year (versus 4.1% in the Nov. forecast) and 3.6% in 2006 (down from 5% previously).

In contrast to the Conference Board's leading index and the alliance's GDP projections, the Federal Reserve Board is a bit bullish. Its monetary policy report that accompanied Chairman Alan Greenspan's testimony to Congress this week estimates real GDP growth this year at 3.75% to 4% and growth in 2006 at 3.5%.

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