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Economic indicators fell by .3% in August

SHARE Economic indicators fell by .3% in August

NEW YORK — The economy was weakening even before the terrorist attacks in New York and Washington, a new Conference Board survey showed Monday.

The New York-based Conference Board said its Index of Leading Economic Indicators fell 0.3 percent in August to 109.6, following a revised 0.4 percent increase in July.

The index was based on data collected before the Sept. 11 attacks on the World Trade Center and the Pentagon.

"There was cautious optimism a month ago that manufacturing declines might have been bottoming out," said Conference Board economist Ken Goldstein. "Now, in the wake of the attacks, economic demand seems likely to slow."

The index is usually closely watched because it indicates where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year.

The report had limited impact on the markets Monday, however, given that the nation's economic outlook has drastically changed since Sept. 11.

In a reversal of last week's plunge, the Dow Jones industrial average was up 258 points to 8,494 in the first hour of trading, while the NASDAQ composite index was up 55 points to 1,478.

Last week, the Dow fell more than 14 percent, suffering its worst point loss ever, as economic and political uncertainty sent stock prices to their lowest levels in three years. The NASDAQ fell more than 16 percent.

Two forecasting groups, Blue Chip Economic Indicators and the National Association for Business Economics, have released surveys after the attacks that said a majorty of economists believe a recession is unavoidable.

As such news snowballs, voices around the United States no longer talk of economic booms or Internet riches, of golden-hued nest eggs or second homes on beach property.

In recent years investors typically responded to sell-offs like last week's with optimism by buying on the dips and reaffirming their faith in the U.S. stock market. But now they are shaken by the prospect of war, weakening consumer confidence and a looming recession.

Individual investors are not fleeing the market entirely. Last week's heaviest selling came from large institutions. Underlying the near-term pessimism of individual investors is optimism about the long-term health of the U.S. economy and the long-term returns of the stock market.

But right now, investors are adjusting to a new set of realities. In a dozen interviews over the weekend, investors appeared hesitant, uncertain and noncommittal. They said they did not want to buy on this dip; they wanted to wait and see what happened. They wanted to sit on their hands.

And so people like Barbara Levine, a real estate agent in Cleveland, are trimming their hopes and expectations and coming to grips with a less prosperous America.

"Everything is collapsing around us," Levine said on Friday, contemplating the prospects of war, a recession and General Electric falling from $60 to $31 a share in the past year.

People like Levine, 52, are no longer thinking about early retirement. They no longer believe that one of their inalienable rights is a rising stock market and a Goldilocks economy.

A growing number of smaller investors are pulling back from the stock market, seeking more conservative alternatives like municipal and treasury bonds.

If attitudes have changed, analysts say, it is because individual investors are starting to grow tired of watching their stocks sink.

Many of the hesitant investors are like the Kaminskys, Elliott and Charlotte, both age 67, and both dependent on stock market returns for some of their retirement living expenses.

Elliott Kaminsky took early retirement a few years ago. He still works part time as a sales manager at Pierre's French Ice Cream Co. in Cleveland. He thought he could get by working part time, but the market drop may keep him on for many more years.

"It's a killer," Kaminsky said of the market plunge last week. "I had $740,000 in my pension plan — you know, what you call an IRA. It's now down to $450,000."

He and his wife, who still does some work as a real estate broker, own their home, a three-bedroom brick-faced cottage in University Heights, just outside Cleveland. They are hardly in desperate straits, but they are worried about the market collapse.

The cost of their prescription drugs alone is about $8,000 a year, they say. So they are already making changes. Perhaps they will drive instead of fly to vacation. And things could change at home, too.

"Maybe we'll be driving one car instead of two," Elliott Kaminsky said. "And maybe I'll be keeping my job a little longer."

Contributing: The Associated Press, New York Times News Service