May 21, 2002 By Adam Geller Ap Business Writer 3 min read

NEW YORK – A decline in a key gauge of U.S. economic activity amplifies doubts about whether the recovery can maintain the strong pace it showed in the first quarter, analysts say. The New York-based Conference Board said Monday its Index of Leading Economic Indicators fell by 0.4 percent in April, the first time it has declined since September, suggesting a recovery that remains quite sluggish.

The dropoff brings the index to 111.7, following a 0.1 rise in March. Analysts had forecast a 0.1 percent decrease. Economists said the decline in the leading indicators does not signal a reversal of the recovery, and downplayed the danger of that scenario. But the report does hint at continued underlying weaknesses that could temper the pace of growth, they said.

“I don’t think there’s much danger of the economy sliding back into recession, but I do think we’re going to pull back from the stronger pace we saw in the earlier part of the year,” said Mark Vitner, senior economist with Wachovia Securities in Charlotte, N.C.

Economists said the decline in the index is typical during a recovery, characterizing it as a temporary setback. “While the leading indicators is down … the coincident indicator says the economy is still rebounding,” said Sung Won Sohn, chief economist with Wells Fargo & Co. in Minneapolis. The coincident index rose 0.2 percent in April to 116.0, for its fifth straight increase.

The index of lagging indicators, which reflects changes that have already occurred, fell 0.4 percent last month to 100.6.

Of the ten indicators that make up the leading index, five decreased in April – real money supply, stock prices, consumer expectations, initial unemployment claims and the interest rate spread.

Looking ahead, continued weakness in the job market is worrisome because of its impact on the mindset of consumers, whose spending has been the engine for the recovery, analysts said. But so far, consumers seem to be holding up quite well, the said. There is a threat that layoffs and slower growth in wages has cut into consumer incomes, Conference Board economist Ken Goldstein said. Rising energy costs and the completion of most mortgage refinancing could slow household purchases in the coming months.

“The signal from the indicators is that the recovery is developing quite slowly,” Conference Board economist Ken Goldstein said. “Despite the strong growth in Gross Domestic Product in the first quarter, the recovery in the industrial core remains weak.”

At the same time, business investment and exports remain weak, giving the economy little protection from a dropoff in consumer demand, Goldstein said.

On Wall Street, the markets were lower Monday afternoon, with the Dow Jones industrial average down 92 points at 10,261 and the Nasdaq composite index 35 points lower at 1,707.

The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.

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