Key Indicators’ Gain Biggest in Nearly 2 Years

In a sign of improved economic activity, the government said Wednesday that its chief forecasting gauge surged in March to the largest gain in more than a year.

“Basically, the message is the economy is showing signs the worst is behind it,” said Robert G. Dederick, chief economist with Northern Trust Co. in Chicago.

The Commerce Department reported that its index of leading economic indicators rose 0.9% in March, nearly offsetting the 1% decline in February. It was the steepest increase since a 1.6% gain in June, 1988.

The index is designed to forecast economic activity six to nine months ahead.

“The (index) is hinting at a takeoff for the economy later this year from an anemic growth pattern of the fourth quarter of 1989 and the first quarter of 1990,” said Allen Sinai, chief economist with Boston Co.

But Dederick said the economy was “not prepared to suddenly go off on a spree.”

Sinai said any progress could be dampened if the Federal Reserve Board decided to boost interest rates further to curb rising inflation. High rates would slow further what has been sluggishness in the auto, construction and industrial sectors of the economy.

“The increase in the leading indicators was a big one, widespread, solidly based,” Sinai said. “If more occurs in coming months, it means the economy will do well later in the year.”

“The strength was pretty concentrated in orders both for consumer and capital goods,” said economist David Wyss of Data Resources in Lexington, Mass.

“I think the Fed is going to look at these numbers and say, ‘basically more of the same,’ ” Wyss said.

Six of the 11 statistics contributed to the increase in the leading indicators, led by a gain in new plant and equipment orders.

LEADING INDICATORS

Seasonally adjusted index, 1982=100. Mar.,’90: 145.2 Feb.,’90: 143.9 Mar.,’89: 144.7