The index of leading economic indicators rose 0.6 percent in August, the seventh consecutive monthly gain, but most of the increase was due to higher stock prices, the Commerce Department reported yesterday.
The increase followed a revised 0.3 percent gain in July in the index, which often foreshadows changes in economic growth.
"It looks good on the surface," said Robert Ortner, undersecretary of Commerce for economic affairs. However, 0.5 percentage points of the 0.6 percent increase resulted from a surge in prices on the New York Stock Exchange. Stock prices have since dropped back somewhat.
"It would have been better if the increase had been more widespread, and it would have been better if we had had continued growth in the new orders series."
Nevertheless, Ortner and most forecasters expect the current economic expansion to continue for some time. The gross national product, adjusted for inflation, grew at a 3.5 percent annual rate in the first half of this year. Forecasts for the quarter that ended yesterday generally range between 2.5 percent and 3.5 percent, followed by similar growth in the final three months of the year.
Of the 11 economic indicators included in the overall index, four improved in August, four worsened and one was unchanged. Two of the indicators, measuring the change in business and consumer borrowing and the change in business inventories, were unavailable.
New orders for business plant and equipment, and new orders received by manufacturers for consumer goods and materials -- both adjusted for inflation -- declined slightly. A measure of how quickly companies deliver incoming orders and an index of sensitive materials prices also fell.
The combined effect of the falling indicators was almost offset by an increase in the measure covering initial claims for unemployment insurance. The number of claims being filed dropped from an average of 327,000 per week to 297,000, which had a positive impact on the leading indicators index.
The seven consecutive monthly increases in the index make up the longest string since 21 straight that began in September 1982, shortly before the end of the 1981-1982 recession.