An index that usually foreshadows changes in the economy rose in October for the sixth time in the last seven months, the Commerce Department reported yesterday, but most economists still see no clear sign that the recession is over.
The department said the index of leading indicators climbed 0.2 percent in October, primarily as a result of higher stock prices and a large increase in the number of building permits issued. The September gain also was revised from 0.5 percent to 1.1 percent on the basis of more complete information.
Another set of indicators, however, which usually track current economic developments rather than predict changes, dropped 1 percent in October. Yet another group, known as lagging indicators, plunged 3.2 percent.
"Although there is a slightly better tone in the housing market and some mixed signals coming from the severely depressed passenger car business, the conclusive signs of recovery are lacking," economist Alan Greenspan of Townsend-Greenspan & Co. said.
The Commerce Department originally reported incorrectly yesterday that the leading indicators had risen by 0.6 percent, and had to issue a correction late in the day. A spokesman for the department said the mistake arose from a "clerical error in compiling new orders for consumers goods and materials."
Greenspan, who tracks changes in the gross national product on a monthly basis, said GNP continued to move lower in October and probably will turn out to be down slightly for the entire fourth quarter. Like most other forecasters, he expects a recovery to begin soon.
Commerce Secretary Malcolm Baldrige said there is usually a lag of only three or four months between improvement in the leading indicators and a rise in actual business activity as measured by the separate group of coincident indicators, which fell 1 percent.
"I believe the prolonged lag this time, and the relatively slow rise in the leading indicators as well, was caused by the persistence of high interest rates into the summer," he said in a statement.
"With rates now down sharply, however, the housing recovery is under way," Baldrige said. "A sustained pickup in sales of new cars and other consumer durable goods can be expected to follow."
Of the 11 statistical series that make up the index of leading indicators, 10 are available now. Five of the 10 rose, one--the length of the average work week in manufacturing--was unchanged, and four declined.
The indicators rising included stock prices, building permits, the proportion of companies getting slower deliveries from suppliers, the money supply adjusted for inflation, and initial claims for unemployment insurance. Those falling included the percentage change in total liquid assets, new orders for manufactured consumer goods adjusted for inflation, contracts and orders for new plants and equipment adjusted for inflation, and the percentage change in sensitive crude-materials prices.
Greenspan pointed to scrap metals prices, part of that sensitive group, "whose rise will almost surely be an early signal of upturn." They remain depressed, with steel scrap prices down 13 percent since September, and aluminum and copper scrap prices showing small declines or at least no increases, he said.