Key Reports Signal a Cooling Economy

Sales of newly built U.S. homes slumped at the end of 1997, an otherwise stellar year for housing, while a major economic forecasting gauge was flat, according to two reports released Tuesday that suggest a cooling-down of the sizzling economy.

The Commerce Department reported that single-family home sales tumbled 9.3% in December, the sharpest monthly drop in more than two years. The retreat came after a November gain that was the highest in 11 years. Even with the decline, sales for 1997 reached a 19-year high.

Adding to the impression of a slowing economy was a separate report from the private Conference Board on the index of leading economic indicators, a tool for forecasting changing economic trends.

The Conference Board, a business research group based in New York, said the index held steady in December after increases of 0.1% in both November and October.

Both reports came as the Federal Reserve Board’s policymaking Federal Open Market Committee began a two-day, closed-door meeting to decide interest rate policy. The Fed is widely expected to leave rates unchanged when it wraps up its meeting today.

The flat reading of the economic indicators index ends five straight months of gains. But its recent performance, along with gains in two sister indicators, “shows a relatively healthy expansion,” the Conference Board said.

The index, designed to forecast economic activity six to nine months in advance, gained at twice its historical pace during 1997, said Conference Board senior economist Michael Beldin.

“With no change for the leading index in December, however, we see signs that economic growth will moderate in 1998,” he said.