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Economy Shows Signs of Rebound : Higher Stock Prices Push Indicators Up 0.5% for March

Associated Press

The government’s main forecasting gauge of future economic activity posted another strong gain in March as the economy continued to send signals of a coming rebound in growth.

The Commerce Department said its Index of Leading Indicators rose 0.5% last month, following an even more robust 0.9% February increase.

The February performance was revised up from an originally reported 0.7% advance.

Stock Price Surge

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The biggest economic factor pushing the index up was the surge in stock prices during March, a month when the stock market soared to record heights.

The latest advance was the tenth in a row without a decline.

Commerce Secretary Malcolm Baldrige said the index showed strength in the financial sectors of the economy but weakness in non-financial components of the index, especially in orders for capital equipment and for consumer products.

“The positive and negative changes among the components of the leading index during recent months reflect some soft spots in the economy,” Baldrige said.

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GNP Expands 3.2%

The government reported two weeks ago that the economy, as measured by the gross national product, was expanding at an annual rate of 3.2% in the first three months of the year.

While this growth rate was four times faster than October-December activity, many analysts discounted the rise, saying it was based primarily on a temporary improvement in the country’s foreign trade performance.

But Kathleen Cooper, chief economist at Security Pacific National Bank in Los Angeles, said the leading index was giving “just one more signal that we are going to have better growth later on in the year.”

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“I am confident that the second half is going to be strong,” she said. “By then, I have to believe that lower interest rates as well as the growth in consumers’ discretionary income because of the lower oil prices will give us better growth.”


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