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Leading economic indicators rise dramatically in January

Published Feb. 22, 2006

A closely watched gauge of future economic activity rose sharply in January, suggesting that the nation's economy could see robust growth in the spring, a private research group said Tuesday.

The Conference Board said its Index of Leading Economic Indicators rose 1.1 percent last month, better than the 0.5 percent gain expected by market analysts. January's increase followed a 0.3 percent increase in December.

The gain in December's leading economic indicator was revised upward from what was originally reported as a 0.1 percent increase, according to Ken Goldstein, the Conference Board's labor economist.

The leading index's January increase reflects improvement in six of 10 components, including stock prices and building permits. The index has increased 2.3 percent from July 2005 to January 2006.

"The economy got off to a good start (early) in the first quarter," said Joe LaVorgna, chief fixed-income economist at Deutsche Bank Securities Inc.

In addition to the gain in the group's leading index, its coincident index, a measure of the current economy, rose 0.2 percent in January, after a 0.2 percent increase in December.

"The coincident economic indicators have been rising moderately but steadily in recent months, suggesting the economy is sustaining a relatively moderate pace," Goldstein said in a statement accompanying the data.

"The Leading Economic Index, however, rose sharply in three of the last four months. That could be a signal of a faster pace this spring," Goldstein added.

But economists such as LaVorgna and Stephen Stanley, chief economist at RBS Greenwich Capital Markets, warned that some of the gains made in January may have been exaggerated by warm weather that encouraged construction activity, retail spending and vehicle sales. Some of the gains seen last month, they warned, may take away from economic growth in future months.