Leading indicators show strength heading into ‘11

By Associated Press
Posted Dec. 17, 2010 at 10:39 a.m.

A gauge of future economic activity rose in November, at the fastest pace since March, suggesting the economy will strengthen early next year.

The Conference Board said its index of leading economic indicators rose 1.1 percent last month — the biggest increase since March, when the index jumped 1.4 percent.

The leading indicators rose 0.4 percent in October and 0.6 percent in November. The index has risen for five straight months. Deutsche Bank economist Joseph LaVorgna said the index’s leap suggested that economic growth picked up significantly, to more than 3 percent, in the October-December quarter and would continue to accelerate in the first three months of next year. Faster economic growth would help lower the 9.8 percent unemployment rate.

The economy grew at a 2.5 percent pace from July through September.

The leading indicators had stalled this summer as U.S. economic growth slowed. A revival in the stock market helped the index accelerate this fall. Plans by the Federal Reserve and U.S. government to try to jump-start the economy have buoyed shares — the Dow Jones industrial average closed at its highest point since September 2008 on Thursday.

Economists have said that the $858 billion tax deal that President Barack Obama will sign into law Friday, will help the economy grow faster in 2011. Mark Zandi, a prominent economic forecaster with Moody’s Analytics, expects a 3.9 percent pace of growth in 2011, up from an earlier forecast of 2.8 percent.

The bill keeps in place tax cuts instituted by President George W. Bush for another two years. It also cuts Social Security taxes for workers and extends unemployment benefits for people who have long been out of a job.

The Conference Board, a private research group based in New York, measures data  about real estate, manufacturing, employment, consumer confidence and financial markets.

Of the 10 measures the it uses to calculate the leading indicators, nine increased in November. Only sluggish building permits, a signal of future home construction, pulled down the measure.

“The indicators point to a mild pickup after a slow winter,” said Ken Goldstein, a Conference Board economist. But he cautioned that high unemployment and a strained housing market could continue to weigh on economic growth.

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