Economic Indicators Index Rises Unexpectedly

New York, NY, Jan. 26 , 2009--The index of leading U.S. economic indicators unexpectedly increased in December as the money supply expanded.

The Conference Board’s gauge rose 0.3 percent, the first gain in six months, after a 0.4 percent drop in November, the New York-based group said today. The index points to the direction of the economy over the next three to six months.

Deteriorating labor and housing markets, the lack of credit and shrinking household wealth have battered the economy, threatening to extend what is already the longest economic slump in a quarter century.

The index was forecast to decline 0.2 percent, according to the median estimate of economists, after an originally reported drop of 0.4 percent in November. Estimates ranged from a decline of 0.7 percent to a gain of 0.4 percent.

Four of the 10 indicators in today’s report added to the index, led by 0.99 percent increase in the money supply adjusted for inflation, which has the biggest weighting in the index. That reflected increased lending and purchases of securities by the Federal Reserve to unclog credit markets and ease borrowing costs.

The Fed in December cut the overnight lending rate to a range between zero and 0.25 percent, and has begun purchasing $500 billion of mortgage bonds of Fannie Mae, Freddie Mac and Ginnie Mae by June 30 to help reduce home-loan rates.

Also contributing to the index’s rise were interest rate spreads, manufacturers’ new orders for consumer goods and new orders for non-defense capital goods.

The Conference Board’s index of coincident indicators, a gauge of current economic activity, fell 0.5 percent, after decreasing 0.3 percent the prior month. The index tracks payrolls, incomes, sales and production.