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Index suggests growth to continue

A gauge of leading economic indicators rises 0.3% in December, beating expectations.

January 24, 2007|From Reuters

A key forecasting gauge for the U.S. economy rose by a larger-than-expected 0.3% in December, a research group's report showed Tuesday, suggesting moderate growth in the months ahead.

The rise in the Conference Board's index of leading economic indicators topped Wall Street expectations of a 0.2% increase, but followed a reading for November that was revised downward to show no change.

"The latest data for the leading economic index is pointing to a continued moderate growth or even a little acceleration," said Ken Goldstein, an economist at the New York-based research group.

"The combination of income growth and lower energy prices might spark a little more economic activity this spring, unless offset by some new development," he said in a statement.

The November index originally was reported to have risen 0.1%. The Conference Board also revised down its reading for October to show a 0.1% drop rather than a 0.1% gain.

The index, which measures a basket of economic indicators including unemployment insurance claims and building permits, is designed to forecast economic trends as many as six months ahead.

Six of the 10 indicators that make up the index increased in December, with the largest gain in building permits, which saw their first increase since January 2006.

The largest drags on the index were interest rate spreads and consumer expectations, the Conference Board said.

The coincident index, a barometer of current economic performance, rose 0.2% in December after increases of 0.2% in the two previous months.

The report adds to a recent spate of data suggesting the economy will expand at a steady pace in 2007. New-home building rose in December, while industrial output logged a stronger-than-expected gain. Also, new claims for jobless benefits hit an 11-month low earlier this month.

The solid data have led financial markets to scale back bets on interest rate cuts. Federal Reserve policymakers gather next Tuesday and Wednesday and are expected to hold benchmark borrowing costs steady for a fifth straight meeting.

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