In this Orwellian year of 1984, bad news can be good news, at least where the economy is concerned. The Commerce Department announced last week that the index of leading economic indicators dipped .8% in July after falling 1.3% in June. The report marked the first time since early 1982 that the closely watchedbarometer of future economic activity has dropped in two consecutivemonths, and thus suggested that the economy is slowing. Ordinarily,that would be a danger signal, but the White House welcomed theCommerce announcement as a sign that moderating growth will encourageinterest rates to fall.
A break in borrowing costs would aid such industries as housing andautos. It might also help lower the lofty value of the dollar, whichhas risen to record levels because high U.S. interest rates havespurred foreigners to convert their money into dollars for investmentin the U.S. A cheaper dollar, in turn, would help narrow the burgeoningU.S. trade deficit by making America’s exports less costly and itsimports more expensive. Figures released last week showed that thetrade gap hit a record $14.1 billion in July and $74 billion for theyear so far.