Growth Gauge Is Pointing at ‘Moderate’ : Economy: The index of indicators rose again in September. Factory orders and building were two positive factors.

The government’s economic forecasting gauge rose 0.5% in September, the Commerce Department said Tuesday, indicating moderate growth into 1994.

The advance in the index of leading indicators followed a strong 0.9% gain in August. The index had been unchanged in July and up 0.1% in June, so September was the fourth month without a decline.

The index is designed to forecast economic activity six to nine months in advance. Three consecutive drops are often seen as a forerunner of recession.

The report fits with analysts’ belief that the economy, after lapsing in the first half of this year to an annualized growth rate of 1.4%, is now expanding at a moderate rate of about 3%.

“It appears that the economy is gaining some momentum in the fourth quarter,” said economist Lynn Reaser of First Interstate Bancorp in Los Angeles. “On balance, I think the short-term outlook looks quite positive.”

Six of the index’s forward-looking indicators were positive in September. In the order of their impact, from largest to smallest, they are:

* An increase in the inflation-adjusted money supply.

* A rise in new orders for consumer goods.

* A gain in building permits.

* An advance in stock prices as measured by the Standard & Poor’s 500.

* An uptick in consumer expectations as measured by a University of Michigan survey.

* An increase in the inflation-adjusted backlog at factories of orders for durable goods such as cars and computers.

The negative indicators, in order from the greatest to smallest impact, are:

* A speedup in business delivery times, a sign of decreased demand.

* A decline in contracts and orders for new commercial buildings and business equipment.

* A rise in applications for unemployment benefits, to an average of 381,000 weekly in September from 378,000 a week in August.

* Declining prices for raw materials, another sign of slack demand.

One indicator, the average workweek of factory workers, was unchanged at 41.4 hours.

The various changes left the index at a seasonally adjusted 153.6, up 3.3% from a year earlier and up 1.3% from three months ago.

Economists cite a number of reasons for the pickup, among them declining long-term interest rates. Availability of cheaper mortgages stimulated construction spending, which rose for a fifth month in September for the longest string of advances in more than six years.

Low interest rates also help consumers buy big-ticket items such as autos and appliances and stimulate business purchases of computers and other equipment.

Some of the improvement was due simply to the natural ebb and flow of economic activity. A portion of the slowdown earlier this year was a response to the unsustainable burst of growth seen in the final three months of 1992.

“I think things are improving. Consumers seem to be picking up a little bit after their recent funk,” said economist David Wyss of DRI-McGraw Hill of Lexington, Mass. “I don’t think we’re in for a burst of euphoria, I think we’re just in for more normal (consumer) confidence (survey) numbers.”

While almost no economist was predicting a relapse next year to the kind of low growth registered early this year, some economic uncertainties lie ahead in 1994.

Europe and Japan, struggling against severe economic problems, are buying fewer U.S. exports. Retail sales may suffer next spring, as upper-income earners feel the bite of tax increases enacted by Congress and the Clinton Administration in August. Businesses may become even more wary of expanding their payrolls as they worry about how much pending health insurance legislation will cost them.

Leading indicators, seasonally adjusted index, Sept., ’93 153.6. Source: U.S. Department of Commerce