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Leading indicators rise
August 20, 2001: 10:32 a.m. ET

Research group's index of future U.S. economic health rises as expected
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NEW YORK (CNNfn) - A closely watched index of future economic activity in the United States rose for the fourth straight month in July, showing signs of strength in the world's largest economy a day before the Federal Reserve meets to discuss interest rates.

The Conference Board, a New York-based business research group, reported its Index of Leading Indicators rose 0.3 percent in July to 109.9 after rising 0.3 percent in June. Economists surveyed by expected the index to rise 0.3 percent.

"The expansionary monetary policy adopted by the Federal Reserve since the first half of this year continues to be the primary factor pushing the leading index up," the Conference Board said.

The Fed has slashed its target for short-term interest rates from 6.5 percent to 3.75 percent this year in an effort to avoid a recession. It's widely expected to cut rates again by another quarter-percentage point after its policy meeting Tuesday.

U.S. stocks bounced higher after the report, while U.S. Treasury bond prices fell.

Click here for more on the Fed and rates

Despite a year-long slowdown in economic growth, the United States has avoided a recession, defined as two consecutive quarters of shrinking gross domestic product (GDP). Still, the Commerce Department's first estimate of second-quarter GDP of 0.7 percent was made without several data, including trade and business inventories, both of which could reduce the GDP.

The increase in the index of leading indicators points to some improvement in overall economic conditions and provides further evidence to ease recession fears. The index is closely watched because it indicates where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year.

Conference Board Economist Ken Goldstein said the composite index suggests that economic conditions could "begin to make way for a better economy this fall."

The Conference Board said five of the 10 components that make up the leading indicators index increased last month: money supply, average weekly initial claims for unemployment insurance, interest rate spread, average weekly manufacturing hours and index of consumer expectations.

Click here for's economic calendar

The negative contributors to the index were stock prices, building permits, and vendor performance.

Manufacturers' new orders for nondefense capital goods and manufacturers' new orders for consumer goods and materials held steady for the month of July.

The group's index of coincident indicators, which measures current economic activity, edged up 0.1 percent in July to 116.3. The index of lagging indicators, which reflect changes that have already occurred, decreased 0.7 percent to 104.7. graphic

- from staff and wire reports


Special report: Eyes on the Fed

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Conference Board report

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