Economy Shows Signs of Rebound--Up 0.7%

The government’s main economic forecasting gauge jumped a strong 0.7% in February, the Commerce Department said today, as it revised January’s 0.6% drop in the index of leading indicators to no change--meaning that for 10 straight months it has not fallen.

Both the Reagan Administration and private analysts said this showed the country is poised for a sharp rebound in growth.

The department said last month’s increase was the strongest since a 1.5% December advance that was the biggest gain in more than two years.

Both the February increase and the January upward revision were seen as signals that the economy is rebounding from the sluggish growth that has plagued the country for the past year.

‘1986 Very Prosperous’

White House spokesman Larry Speakes, with President Reagan in Santa Barbara, Calif., said, “The new figures are the latest in a continuum of strong economic news. There can be little doubt that 1986 will be a very prosperous year for a growing number of Americans.”

As measured by the gross national product, the economy grew a sluggish 2.2% in 1985, the slowest rate since the recession year of 1982, but the Administration is forecasting that growth this year will be a robust 4%.

While many private analysts agreed that falling oil prices and lower interest rates will spur economic growth, some cautioned that the pickup may not come until the second half of the year.

“We have a current pattern that is sluggish,” said Lawrence Chimerine, president of Chase Econometrics, a private consulting firm. He noted that consumer spending has been weak this year and factory production fell in February.

“But the underlying fundamentals--oil prices, interest rates and the dollar--are getting better,” he said. “This suggests that the economy is going to pick up in the second half of the year and the leading indicators are telling us that. We will have modest growth but no boom.”

Jerry Jasinowski, chief economist for the National Assn. of Manufacturers, also forecast a rebound after mid-year.

“Although the first half should witness only very sluggish economic activity, by the second half of the year, the economy is expected to be growing in the 4% range,” he said.

Two-thirds of the increase in the index in February came from a big jump in new orders for business capital equipment. Analysts said this increase showed growing optimism on the part of industry that the falling dollar will help boost their sales in coming months.

Michael Evans, head of a Washington forecasting firm, predicted that the March increase in the leading index would be a “blockbuster” given the surge in the stock market which has already occurred and other favorable economic developments.

Oil Drop Positive Factor

The steep drop in oil prices, the most positive factor now influencing the economy, is not measured directly in the leading index. But Commerce Secretary Malcolm Baldrige said the beneficial fallout of the collapsing oil market had shown up indirectly by helping to lower inflation and boost optimism in the stock market.

After the rise in capital equipment orders, the biggest positive factors were a rise in stock prices, an increase in the money supply, a gain in the number of new businesses and a slowdown in the pace business shipments were made, reflecting increasing demand.

Six of the indicators gave negative readings. The biggest negative factor was a drop in building permits, followed by declines in business and consumer credit, a drop in manufacturers’ orders for consumer goods, a rise in weekly unemployment claims and changes in the price for raw materials.