THE ECONOMY : Leading Indicators Drop 4th Time in 5 Months

WASHINGTON — The government said Thursday that its chief economic forecasting gauge declined in June for the fourth time in five months, renewing concerns that the longest peacetime economic expansion may be nearing an end.

The Commerce Department’s index of leading economic indicators edged down 0.1% in June following a May decline of 1.3%, which had been the steepest drop in 19 months.

Some analysts said they believed that the economy is headed for a downturn, based on the weakness already shown in the leading index and various other business barometers.

At the White House, the Bush Administration remained optimistic of reaching its target for overall economic growth of 2.9% this year, as measured by the GNP, although officials said growth would be lower than in 1987 and 1988.

Inflationary Pressures

In another report showing general weakness, the Labor Department said Thursday that productivity of American workers edged up a minuscule 0.2% in the April-June quarter after having fallen by 1.3% in the first three months of the year.

The sluggish growth in productivity, defined as output per hour of work, was accompanied by rising employment costs. Unit labor costs rose at an annual rate of 5.2% in the second quarter after an even faster 6.2% rate of increase in the second quarter.

The 0.1% drop in the June leading index reflected widespread weakness, with seven of 11 components declining.

The biggest negative impact came from drop in raw material prices. While this is an indication of lessening inflation pressures, it also can mean less demand, which is viewed as a negative by the forecasting gauge.

Other negative forces in June were a jump in unemployment claims; a fall in building permits; a speedup in business delivery times, also viewed as a sign of falling demand; a decline in the length of the average work week; a drop in orders for consumer goods, and a smaller backlog of unfilled orders for manufactured goods.

Four indicators showed strength in June. The biggest plus factor was a rise in stock prices followed by higher consumer confidence, faster growth of the money supply and an increase in plant and equipment orders.

The various changes left the leading index at 143.5% of its 1982 base of 100.