Key Economic Index Signals Steady Gains : Up 3rd Month in Row; Factory Orders Rise 1.2% in April

The government said today its chief forecasting gauge of economic activity rose a moderate 0.2% in April in what amounted to a signal of steady economic growth with no danger of a recession this year.

The Commerce Department said its Index of Leading Indicators rose for the third consecutive month, following a revised 0.2% March increase and a 1.5% February surge, the biggest gain in more than two years.

Economists said the performance of the leading index is entirely consistent with their belief that the economy is headed for its best year since 1984 as smokestack America benefits from a boom in export sales.

“The rise in the leading indicators indicates the economy is experiencing continuous expansion based primarily on improving trade and greater capital investment,” said Jerry Jasinowski, chief economist of the National Assn. of Manufacturers.

In other good economic news, the Commerce Department said that orders to U.S. factories rose a strong 1.2% in April following a 1.6% March increase.

Construction Spending Up

The department also reported today that construction spending edged up 0.1% in April as a big jump in investment on new factories offset a decline in spending on government projects.

All of this should be good news to Vice President George Bush, who hopes to benefit from a feeling among voters that the Reagan Administration is managing the economy well.

The March increase had originally been reported as a much larger 0.8% rise. Analysts had expected both the big downward revision to the March figure and the small increase in April.

They said the gains reflected a return to more normal economic activity following a roller-coaster period after the October stock market crash.

At one point, the leading index actually fell for three consecutive months, the traditional signal of an impending recession. Later revisions, however, showed the index posted big declines in both November and January, but registered increases in other months.

Overall Economy Gains

The government reported last week that the overall economy, as measured by the gross national product, raced ahead at an annual rate of 3.9% for the first three months of the year.

The 0.2% April rise in the leading index reflected increases in five separate business indicators and declines in four others.

The biggest source of strength was a rise in the length of the average workweek.

Other sources of strength came from gains in the money supply; a drop in weekly unemployment claims; a rise in raw materials prices, which is seen as a positive sign for future economic growth; and an increase in plant and equipment orders.

The biggest negative factor was a speed-up in delivery times for business orders.