Economic indicators rose in December

Adam Geller

Thursday, Jan. 20, 2005 | 9:23 a.m.

NEW YORK -- A closely watched measure of future economic activity rose for a second consecutive month in December, pointing to sustained, gradual growth.

The Conference Board, a private research group, said today that its Index of Leading Economic Indicators rose 0.2 percent last month, following a revised gain of 0.3 percent in November. The increase, which was in line with economists' forecasts, pushed the index to 115.4, still below its high of 116.5 in May.

The gains in the index followed five months of decline. The index is intended to predict economic activity over the coming three to six months.

"This reflects a positive shift in the balance of forces -- a more positive picture in the last two months than in the prior five months," said Ken Goldstein, an economist for the New York-based Conference Board. "Although retail sales were modest in December, investment in equipment and homebuilding remain strong segments of the economy."

Four of the ten indicators that make up the index rose in December, including the index of consumer expectations, stock prices, real money supply and average weekly first-time claims for unemployment benefits. The declining indicators included vendor performance, interest rate spread, manufacturers' new orders for nondefense capital goods, building permits, and new orders for consumer goods and materials. Average weekly manufacturing hours were unchanged.

An accompanying coincident index, which measures current economic activity, increased by 0.3 percent in December, following a 0.2 percent gain in November. The lagging index, which looks back at the economy in past months, was unchanged in December, after a decline of 0.3 percent in November.

The continued improvement in the leading indicators likely means that the declines in the prior five months were only a pause in the longer-term economic advance, the Conference Board said.

The performance of the leading indicators index during the second half of last year points to an economy that is likely to continue expanding in the near term, but at a slower rate than has been typical in the past, the group said.