Leading Indicators Up 0.3%

A key gauge of U.S. economic activity moved slightly higher last month, but not enough to suggest the economy is likely to recover any time soon, analysts said.

The Conference Board said Tuesday its index of leading economic indicators rose 0.3% in October to 109.4 after tumbling 0.5% in September and dipping 0.1% in August.

“The Federal Reserve is responsible for most of the strength in the index,” said Michael Swanson, chief economist at Wells Fargo & Co., referring to the board’s interest rate cuts. “Don’t read too much into this particular number. It’s better than a decline, but you have to take off the cover and look underneath it and see what’s driving it.”

The index indicates where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year. Analysts were expecting no change.

The report coincided with another released Tuesday by the Commerce Department saying the September U.S. trade deficit narrowed by a record amount to $18.7billion.

But the improvement was due mostly to huge payments by foreign insurance companies for the Sept. 11 terrorist attacks, which offset a growing deficit in goods.

Stocks closed broadly lower on the news amid some profit-taking.

The Conference Board largely attributed the October gain in the index to higher stock prices and the Fed’s interest-cutting campaign over the last year. But the labor and housing sectors lost ground.

The central bank has cut interest rates 10 times this year to boost the slumping economy, which was already besieged by a surge in layoffs, weak corporate earnings and sagging stock prices before the attacks on the World Trade Center and the Pentagon.

The Fed is expected to reduce rates an 11th time when it meets in December.

“Zero-point-zero-percent financing and low mortgages are great for people who have jobs,” Swanson said. “But if you don’t have one, no one is going to lend you money anyway.”

Swanson said improvement in employment and factory use would convince him that the economy is on the verge of turning around.

Conference Board economist Ken Goldstein also appeared unimpressed with the increase in the index, saying it rose simply because the attacks exaggerated September’s figure.

The board said seven of the 10 components of the leading index contributed to its increase in October: vendor performance, interest rate spread, money supply, stock prices, manufacturers’ new orders for consumer goods and materials, manufacturers’ new orders for non-defense capital goods and the index of consumer expectations.