Economic Indicators Up a Healthy 0.6% in Dec. After Nov. Drop

The government’s chief economic forecasting gauge rose a healthy 0.6% in December after having fallen during the previous month, the Commerce Department said today.

The December jump in the Index of Leading Economic Indicators, which is designed to predict economic activity six to nine months in the future, followed a 0.2% decrease in November and a 0.5% rise in October.

The index has alternated between dips and gains for the past nine months, which many economists believe is a signal that the economy is headed for a slowdown in growth that would help keep inflation in check.

“It tells you that there is not a boom building,” said Samuel D. Kahan, chief economist for Kleinwort Benson Government Securities Inc. in Chicago. “It suggests maybe somewhat slower growth in the next couple of quarters but it most assuredly does not point to any kind of a recession.”

The economy grew a robust 3.8% in 1988, but the slowest quarterly performance in two years was recorded during the October-December period, when the increase in the gross national product was held to an annual rate of 2%.

6 Factors Contributed

Although President Bush plans to adopt his predecessor’s forecast that the economy will grow at a 3.2% rate in 1989, many private economists believe that the Reagan Administration’s predictions for growth, interest rates and inflation were too optimistic.

Six of the nine available components of the economic index contributed to December’s increase, while two detracted from it.

The biggest boost came from an increase in manufacturers’ orders for consumer goods. Other business barometers that contributed to the increase were: rising stock prices, more orders for new plants and equipment, rising prices for raw materials signaling a strong demand, increased demand for business permits and growth in the inflation-adjusted money supply.

The indicators that made a negative contribution were a shortening in the length of the average workweek and an increase in weekly unemployment claims.

One indicator, the time needed for companies to receive deliveries from vendors, was unchanged.

Construction Spending

December’s increase left the index at 194.6% of its 1967 base of 100. That was up 2% from the same month a year earlier.