Economic Indicators Signal Moderate Growth Ahead Chief Forecasting Gauge Climbs For Second Time This Year; Factory Orders Surge

In new signs of moderate economic growth, the government’s main forecasting gauge rose in August for the second time in three months and auto production pushed factory orders to their biggest gain since last fall.

Issuing its Index of Leading Economic Indicators for one of the last times, the Commerce Department said Wednesday the barometer of economic activity climbed 0.2 percent in August to retrace an identical loss in July.

The index, which the government is turning over to a private company, also edged up in June for its only other advance this year.

The department also announced that factory orders swelled by 2.6 percent in August as rebounding auto demand pushed the indicator to its largest increase since a 2.8 percent leap last November. Excluding transportation goods, orders were up just 1 percent.

Analysts said the numbers confirm that the economy is expanding moderately with little evidence of inflation and likely will continue to do so at least for the rest of 1995.

“The backlog of inventories that caused much of the slowdown in the middle of the year now seems to be clearing, setting the stage for new production,” said Jerry Jasinowski, president of the National Association of Manufacturers.

“The economy is poised to resume growth, but at a moderate level of around 2.5 percent,” said Chris Varvares of Laurence H. Meyer & Associates, a forecasting firm in St. Louis. “Manufacturing went through some pretty rough sledding in the middle of the year, but there’s enough momentum now that the Federal Reserve doesn’t need to cut interest rates.”

The Fed, after doubling the rate banks charge each other for overnight loans over a one-year span, lowered it in July for the first time in nearly three years.

The stock market continued its weeklong slide. The Dow Jones industrial average fell 9.03 points to 4,740.67. The benchmark 30-year Treasury bond was little changed, yielding 6.44 percent.

Higher stock prices were one of the factors contributing to the rise in the Index of Leading Economic Indicators in August. Eight of the barometer’s 11 components contributed to the advance.

In a cost-cutting move, the embattled Commerce Department will hand over control of the report in December or January to the New York-based Conference Board, a private research group. Republicans in Congress have cut appropriations to the department and are threatening to dismantle it.

The index, aimed at predicting activity six to nine months down the road, had fallen four straight months earlier this year and added to recession fears before recovering in June. Three straight moves in one direction are considered a good indicator of where the economy is headed.

In the August report, the components besides stock prices that made positive contributions to the index were factory orders for consumer goods, initial weekly claims for state unemployment insurance, money supply, average work week, new business orders for plant and equipment, building permits and manufacturers’ unfilled orders for durable goods.

The only components that subtracted growth were prices of raw materials, more rapid business delivery times that signal declining demand and slipping consumer confidence.

In the factory report, orders rose in August for the first time in three months and came after a 1 percent decline in July that the government previously estimated at 1.3 percent

Besides autos, other durable goods such as industrial machinery and metals also surged.