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The 1.1 percent decline in the March index of leading indicators may be a sign that the economic boom is weakening. Much of the drop, however, can be attributed to the bad weather that month, which slowed construction and transportation activity.
David A. Wyss, chief financial economist of Data Resources Inc., says that while the decline was steeper than expected (its first drop in 20 months), this is not the beginning of a downtrend. The index should move back up in April.
The composite index is considered important for its overall trend and not for the month-to-month changes. It is designed to forecast economic performance in the weeks and months ahead.
The bond market should be heartened by Monday's news, economist Wyss notes, since a slower economy might take pressure off interest rates. But loan demand remains strong, and the Federal Reserve holds the key to interest rates more than economic activity does, he says. Equity markets should greet the news with mixed emotions, Wyss says, interpreting moderate interest rates as good but a slower economy as possibly meaning lower levels of corporate profits.