U.S. Economy Index Takes Biggest Jump in Two Years

The government’s main gauge of future economic activity jumped 1.7% in January, its biggest advance in almost two years, the Commerce Department said today.

The department said the January advance in its Index of Leading Indicators came after a string of weak performances beginning last June, a period when the index dropped for four out of seven months.

The Reagan Administration hailed the big January increase as proof that the economy is rebounding strongly after a late summer slowdown, but many private economists cautioned against attributing too much significance to the unusually large gain.

Biggest Since 1983

The January jump in the leading indicators was the biggest increase since a 1.9% gain in June, 1983. It followed a 0.5% decline in December, which was revised down from an earlier 0.2% decline.

A string of 21 consecutive increases was broken with big drops last June and July. But the government changed a previously reported August decline to a small increase today, meaning that the index did not drop for three consecutive months. Such a string of three declines has often, but not always, been the signal for the start of a new recession six to nine months down the road.

In January, eight of 11 indicators posted increases, with the biggest gain coming from a jump in manufacturers’ orders for consumer goods. Also making positive contributions to the index were credit demands, the money supply, stock prices, new business formations, building permits, vendor deliveries and weekly unemployment claims.

Decreases Shown

The three indicators that decreased were equipment orders, changes in materials prices and the length of the work week.

At the White House, presidential spokesman Marlin Fitzwater said the indicators “are predictive of healthy growth in the economy in the months ahead.”