Gauge of Economy Reverses Decline

An index of leading U.S. economic indicators rose in November for the first time in six months, buoyed by higher stock prices. However, the 0.2% increase reported Monday by the Conference Board was too small to dispel concerns that the expansion would cool next year.

“The economy is likely to continue to move in fits and starts,” said David Resler, chief economist at Nomura Securities International Inc. in New York, who correctly forecast the amount of the gain in the Conference Board’s index.

The increase followed a drop of 0.4% in October that was steeper than initially estimated. Besides the increase in stock prices, a decline in jobless benefit claims and expansion of the money supply helped push up the composite index, designed to chart the economy’s direction in the next three to six months.

The Bush administration and economists predict that gross domestic product will expand 3.5% in 2005, compared with at least 3.9% this year. Annual economic growth averaged 3.3% in the last two decades, a period that included two recessions and a record 10-year expansion.

Growth in the range of 3% to 4% “is pretty solid,” said James Tisch, chief executive of New York-based Loews Corp., which owns insurance, tobacco and energy businesses.

The median forecast in a survey of 52 economists had expected the index to rise 0.1% after the drop of 0.3% initially reported for October. Forecasts ranged from a decline of 0.1% to an increase of 0.3%.

The Conference Board’s index of coincident indicators, a gauge of the current state of the economy, rose 0.1% in November after increasing 0.4% the month before. The index tracks payrolls, incomes, sales and production.

The index of lagging indicators fell 0.1% last month after rising 0.1% in October. The board is a business research organization based in New York.

Six of 10 indicators that make up the leading index contributed to its rise. Increases in consumer expectations and new orders for non-defense capital goods and for consumer goods combined with the gain in stock prices, growth in money supply and drop in jobless claims to lift the index.

The Standard & Poor’s 500 index average rose 3.9% in November. Consumer expectations, as measured by the University of Michigan, rose to 85.2 from 83.8. First-time unemployment claims dropped to an average 336,750 last month from 341,000 in October. It was the first time since July that claims averaged fewer than 340,000 a week.