WASHINGTON -- The U.S. economy is at a virtual standstill despite the Federal Reserve's many moves to lower short-term interest rates, and there is not much hope of a turnaround anytime soon, analysis said yesterday.
Their comments came after the Commerce Department reported that the government's index of leading economic indicators rose a feeble 0.1% in October, the third month in a row that the statistical series was essentially flat.
The revised September index edged own 0.1%, and the August reading showed no change.
"There's still a pulse, but it's not a strong one, said Chris Varvares, vice president of Laurence H. Meyer & Associates Ltd., a St. Louis-based forecasting firm.
"I think basically we're dead in the water," said Bruce Steinberg, manager of macroeconomic analysis for Merrill Lynch. "I don't think we're going anywhere, and we're going to be that way for the next three to six months."
Michael Boskin, chairman of the President's Council of Economic Advisers, acknowledged yesterday that things are not going very well.
"The economy has turned quite a bit more sluggish," he told a conference sponsored by the Agriculture Department. "I wouldn't for a moment suggest the economy doesn't continue to have a serious problem."
Economists do not like to place too much importance on the index of leading indicators, but other recent statistics have not been encouraging.
Last week, the Conference Board reported that consumer confidence plunged in November to a level that was below that of the 1982 recession. With consumers worried about their jobs and income, spending has also fallen off critical Christmas shopping season gets under way.
Retail sales have not gone anywhere since July, and last week the Commerce Department reported that personal spending in October fell 0.3%. Personal income was up only 0.2%, the smallest advance in three months.
Moreover, the industrial sector -- whose smart advances during the summer helped put a little bounce in the economy, along with the housing sector -- now appears to be grinding its gears again. The National Association of Purchasing Management said yesterday that manufacturing growth was at a virtual standstill in November.
The only bright spot in the current economic climate is in the construction sector, where lower interest rates have apparently lured some buyers back into the market. The Commerce Department reported yesterday that sales of new single-family homes rebounded 2.2% in October to a seasonally adjusted annual rate of 513,000.
On Monday, the Commerce Department reported that construction spending in October rose 1% for the fourth consecutive monthly gain. But gains in the housing sector are not all that impressive when compared to past recoveries, and other problems in the economy are putting a damper on things, economists say. One concern that is getting more mention is the high debt burdens piled up by government, business, and individuals.
"Whatever apparent recovery took place over the spring is clearly stillborn, crushed under by the weight of debt in the economy, and it's going to take a while to get up a head of steam," Mr. Steinberg said.
The Commerce Department is scheduled today to release a revised estimate for third-quarter U.S. output. The preliminary estimate showed an increase of 2.4%, but analysts say the evidence so far for the current quarter shows little, if any, growth in the economy.
"I think we're still in recession," said Robert Brusca, chief economist for Nikko Securities Company Internationl. It is turning out to be the longest postwar recession on record, much longer than the 16-month recessions of 1981 to 1982 and 1973 to 1975, he added.
Mr. Brusca and other analysts expect Fed policymakers to ease monetary policy again before the end of the month by trimming the federal funds rate from 4.75% to 4.5% especially with fiscal policy on hold while Congress is adjourned and President Bush holds off on any new initiatives.
The Federal Open Market Committee, the Fed's policy arm, is scheduled to meet Dec. 17 and Dec. 18 to review economic and monetary issues. Some analysts say the Fed may act to trim short-term rates before then if the unemployment report for November is a bad one. The report is due out Friday.
Most economists are predicting the report will show labor market conditions, stagnant for months, became worse. The median estimate from MMS-McGraw Hill calls for a drop of 30,000 in November nonfarm payrolls and a rise in the civilian jobless rate from 6.8% to 6.9%.
Still, some analysts say, there is still reason to hope the economy can limp along. William Griggs, managing director of Griggs & Santow Inc., said he sees around 1.5% growth in the current quarter, "or a little bit less," and perhaps 1% in the first quarter.
"The economy will eventually come around, but it's going to be slow," said Frank M. Robbins 3d, senior vice president for Patten & Patten Inc. in Chattanooga, Tenn.