Economic index climbs again, lifting hopes for recession's end

Leading indicators up for third straight month

January 23, 2002|By BLOOMBERG NEWS

WASHINGTON -- The U.S. index of leading economic indicators rose in December for the third straight month, a sign the recession may end by the middle of this year.

The 1.2 percent increase in the Conference Board's forecasting gauge, released yesterday, followed gains of 0.8 percent in November and 0.1 percent in October. It was the largest rise since February 1996, when the United States was bouncing back from East Coast snowstorms a month earlier.

Three increases in a row in the index mirror other signs of improvement in the economy, now in its first recession in a decade. The University of Michigan's consumer sentiment index rose this month to the highest level in a year. Philadelphia-area manufacturing unexpectedly grew in January for the first time in 14 months. And the number of new claims for jobless benefits fell a week ago to the lowest in more than five months.

"You can now find straws in the wind that are very positive," Robert McTeer, president of the Dallas Federal Reserve Bank, said yesterday in a San Antonio speech. "It's too early to know if we're at the bottom, or the beginning of a recovery or the beginning of the beginning, but it certainly looks better than it did a month ago."

The index's rise was led by a drop in first-time claims for unemployment insurance, lower short-term interest rates and an increase in consumer optimism. Analysts expected a 0.8 percent increase in the index, after a previously reported 0.5 percent gain in November, according to a Bloomberg News survey.

The index reinforces views from a survey this month of more than 50 economists by Blue Chip Economic Indicators that the recession, which started in March, will end soon. Nine out of 10 of those polled said the economy is likely to start growing by March.

"The recession could be over soon," said Ken Goldstein, a Conference Board economist. "Three successive monthly increases, each larger than the one before, bring the level of the leading series above the pre-recession peak."

Fed policy makers meet next week to decide if another cut in the benchmark overnight bank lending rate is necessary to nudge the economy out of recession. Another reduction would be the 12th in the last year.

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