The nation`s main business-forecasting gauge rose 0.1 percent in November, the government reported Monday. Private economists said the tiny gain pointed to 1986 as another year of moderate growth and inflation.
The Commerce Department`s index of leading economic indicators advanced at the slowest pace since June, when the barometer rose by the same amount.
The index`s weak showing surprised many analysts, who had been expecting a much better performance because of the stock market`s surge to record highs during the month.
The department revised the index for October to show a rise of 0.4 percent instead of the 0.3 percent increase reported a month ago.
The November index would have dropped by 0.3 percent, except for the big rise in stock prices.
But several economists said the stock market`s jump, which has continued this month, was the most encouraging development in the economic outlook.
”The stock market is a very useful indicator, and it has been one of the most accurate over the years,” said Roy E. Moor, chief economist at First National Bank of Chicago.
”Stock prices tend to be a better leader than other corporate figures,” agreed Robert Dederick, chief economist at Northern Trust Co. ”But the overall index is sort of blah. It suggests that we still haven`t gotten out of the slow-growth pattern in any decisive way.”
Other indicators that contributed to the rise were net business formations, changes in raw-materials prices and manufacturers` orders for consumer goods.
The biggest downward influence came from a drop in business and consumer credit. It was followed by speed in filling orders, orders for capital equipment, building permits and weekly unemployment claims.
Two indicators, the average workweek and the money supply, showed no change in November.
”Consumer credit slowed down as automobile sales fell off in November when the earlier financing incentives were removed,” said Richard S. Peterson, chief economist at Continental Illinois National Bank and Trust Co. of Chicago. ”The production indicators–vendor performance, durable goods orders and the like–were flattish. But the economy is still going up, and there`s little chance of a recession.”
Moor and Dederick agreed that a recession is unlikely in 1986.
”Unless you get negative numbers in the index for at least three consecutive months, the rising numbers generally suggest that the economy will continue to grow,” Moor said. ”We expect it to ding along, with no recession in sight.”
Peterson and Dederick both predicted that the gross national product will rise an average 3.5 percent in 1986, while Moor put expected GNP growth at about 2.5 percent.
Those forecasts are only slightly better than the preliminary estimate that the economy this year grew at a 2.4 percent rate, down sharply from the robust 6.6 percent growth of last year.
Commerce Secretary Malcolm Baldrige said the November report points to
”moderate growth ahead,” but he gave no specific forecast. Baldrige pointed out that the index has averaged a gain of 0.4 percent a month over the last seven months.
Dederick, a former top economist in the Commerce Department, said the economy is still going through ”a struggling type of expansion,” and he said businesses currently ”have no real incentives to expand.
”The auto industry is struggling to hold output even with new financing incentives,” he continued. ”New orders for capital goods haven`t been vigorous. Housing is on a plateau. Defense spending is expected to decline. And the tax bill leaves a lot of uncertainty.”
However, Dederick said he expects the economy to gain more strength in the second half of 1986 after a slow start.
