Chief Economic Barometer Rises for the Second Month

WASHINGTON —  The government said Friday that its chief forecasting gauge rose in August for the second straight month, another sign the nation’s economy is likely to grow, albeit modestly, at least into next year.

The Commerce Department’s index of leading indicators climbed 0.3% last month after rising 0.1% in July and falling 0.1% in June.

The back-to-back July-August advance was consistent with expectations of many analysts who foresee the current economic expansion reaching its seventh birthday in December and continuing into 1990.

Some had thought that the expansion might be curtailed this year by Federal Reserve efforts to control inflation by tightening credit, thus slowing the economy. But as inflation responded, the Fed eased its grip, permitting economic growth to continue but at a slower pace.

The leading indicators are a mix of 11 forward-looking business statistics designed to predict economic activity six to nine months into the future. The index has risen four times this year and declined four, prompting Ysabel Burns McAleer of the American Financial Services Assn. to observe: “This trendless result for 1989 seems consistent with the slow-growth experience of the overall economy.”

“I think if we’re going to have a recession, it probably won’t start before (December) and I still think we will squeeze through 1990 without one,” said Lawrence Chimerine, senior economic adviser at WEFA Group in Bala-Cynwyd, Pa.

Five indicators contributed to the August gain--an increase in manufacturers’ new orders for consumer goods and materials, higher stock prices, an increase in the money supply, lower initial unemployment claims and increased building permits.