The government's main economic forecasting gauge in August sank 1.2 percent in the wake of the Persian Gulf crisis, the government said Friday. It was the steepest drop in nearly three years.
The Commerce Department's Index of Leading Economic Indicators had been unchanged in the month prior to the Aug. 2 Iraqi invasion of Kuwait.Since then, however, an already sluggish economy has shown signs of further weakening as oil prices more than doubled, slowing both sales and production. Both consumer confidence and the stock market also have plunged.
The August decline was the first in four months and the sharpest since a 1.4 percent fall in November 1987.
The index is designed to forecast economic activity six to nine months in advance. Three consecutive declines in the gauge are viewed as a fairly reliable - although not infallible - signal that the economy is headed for a recession.
A survey of the nation's top economic forecasters in late August and early September showed they were growing more pessimistic about chances the economy could avoid a recession in the next 12 months. Indeed, some believed the downturn already has begun.
"Up until now, a large majority of NABE forecasters have expected the expansion to last through 1990 and 1991," the National Association of Business Economists said in a report on the survey.
"But this prospect is now in jeopardy," it continued.