Slight Slowing of the Recovery

The pace of the U.S. economic recovery is slowing a little, after an unsustainable early burst. Last week the Government reported that its index of leading indicators--statistics that foreshadow trends in the economy--dropped in October for the second month in a row. That was the first two-month decline since early 1975, and together with earlier reports showing a rise in unemployment and an acceleration of inflation in October, it suggested a disquieting pattern.

That pattern, however, is somewhat deceiving. The index of leading indicators was depressed by a decline in the nation's money supply during October. But money supply grew rapidly again in early November, as the Federal Reserve Board switched to an easier policy; so it is a good guess that the index turned up in November. And the number of people receiving unemployment benefits dropped by 82,100 in early November, to 5.2 million, indicating that the November unemployment rate to be announced this week will be down. Many economists now forecast that total output of goods and services, discounted for inflation, will rise at an annual rate of 5% this quarter. That would be a solid gain, though below the 13% leap in the third quarter, when output got a one-shot lift as businessmen who had cleaned out their inventories began filling orders from new production again.

Other economic news continued to be favorable. U.S. exports exceeded imports by almost $1.1 billion in October, indicating a record trade surplus of $11 billion for all 1975, v. a $2.3 billion deficit last year. Auto sales in the middle third of November climbed 33% above a year earlier, and car makers plan 54% more assemblies in December than a year ago, though still less than earlier Decembers.

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