Index of leading indicators rises 1.2 percent in December, third consecutive monthly gain

By

Posted 10:30AM on Tuesday, January 22, 2002

NEW YORK - A key gauge of U.S. economic activity rose a strong 1.2 percent in December, and the third consecutive monthly gain signaled that the nation's economy could be nearing a rebound. The New York-based Conference Board said Tuesday that the December gain in the Index of Leading Economic Indicators was the largest since February 1996 and followed a revised rise of 0.8 percent in November and 0.1 percent in October. Analysts had been expecting a December increase on the order of 0.7 percent. Three upward movements in the index generally indicate that the economy will expand in the next three to six months. The economy has been in recession since last March. The Conference Board, a business-funded research group, said the November-December gains were the largest for two consecutive months since December 1992 following the 1990-91 recession. "The strong signal from the indicators means that the recession could be over soon," the board's economist, Ken Goldstein, said in a statement accompanying the report. "Three successive monthly increases, each larger than the one before, bring the level of the leading series above the pre-recession peak." He attributed the latest rises to Federal Reserve cuts in short-term interest rates and strong growth in the nation's money supply. "Falling energy prices have the same impact as a tax cut," he added. "Economic demand was stimulated by steep retail discounting." The index of coincident indicators, which measures currently economic activity, rose 0.1 percent in December following a 0.3 percent decline in November. The index of lagging indicators fell 0.1 percent in December after a revised 0.3 percent drop the month before.