Dec 19, 2003 By Eileen Alt Powell Ap Business Writer 4 min read

NEW YORK (AP) – A key economic forecasting gauge rose a solid 0.3 percent in November, and the government reported a drop in claims for jobless benefits Thursday, presaging what economists believe could be strong growth in 2004. In New York, the business-funded Conference Board said its Composite Index of Leading Economic Indicators advanced 0.3 percent in November to 114.2, suggesting that the economic recovery will gain momentum next year.

Last month’s performance – which was in line with analysts’ expectations – followed a revised increase of 0.5 percent in October to 113.9. The index had shown no change in September. The Conference Board’s economist, Ken Goldstein, said the figures “are pointing to post-holiday strength.”

In Washington, the Labor Department said new claims for unemployment benefits fell sharply last week. It said that for the work week ending Dec. 13, new applications for benefits declined by a seasonally adjusted 22,000 to 353,000, the lowest level since Nov. 1. The drop was much larger than economists were expecting.

“The holiday season is looking brighter for job seekers and the New Year may be dawning even brighter still,” said Oscar Gonzalez, economist at John Hancock Financial Services.

Also Thursday, mortgage giant Freddie Mac said that rates on 30-year and 15-year mortgages declined for the second week in a row, suggesting that the housing market will continue to boom.

For the week ending Dec. 19, the average rate on 30-year mortgages slid to 5.82 percent, down from 5.88 percent the previous week, the company said. For 15-year mortgages, a popular option for refinancing, rates fell to 5.14 percent this week, down sharply from 5.24 percent last week.

The reports helped boost share prices on Wall Street. By midafternoon, the Dow Jones industrial average was up 67.56 at 10,212.82. The Nasdaq composite index gained 25.45, or 1.3 percent, to 1,946.78. The Standard & Poor’s 500 index rose 8.79, or 0.8 percent, to 1,085.27. The index of leading indicators is closely watched because it forecasts trends in the economy in the next three to six months. The U.S. economy was slow to pick up following the recession in 2001.

But many analysts now believe the recovery is deepening and widening and say growth next year could exceed 4 percent.

Gary R. Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis, Mo., said the second consecutive increase in the index of leading indicators “suggests the economy is poised to do well going into next year.”

He noted that corporate profits have strengthened and added: “We’re also seeing gains both in jobs and capital spending, two areas of the economy that were weak.”

Mark Vitner, senior economist with Wachovia Securities in Charlotte, N.C., said that the latest unemployment claims report indicates the job situation is improving.

“Non-farm employment should be posting gains of 200,000 or more per month,” he said. That would begin reducing the ranks of the unemployed.

He added: “It’s mainly increased business investment spending that will be driving the economy and, I think, continued strength in housing and consumer durables.”

Both Thayer and Vitner are forecasting economic growth of 4.5 percent or more next year.

The Conference Board said six of the 10 indicators in the index of leading indicators contributed to November’s advance. They included improvement in claims for unemployment, consumer sentiment, vendor performance, average weekly manufacturing hours, stock prices and the spread in interest rates.

The decliners were building permits, the money supply, new orders for capital goods, and new orders for consumer goods and materials.

The Index of Coincident Indicators, which gauges current economic activity, increased 0.2 percent in November to 116.3 following a revised rise of 0.3 percent in October to 116.1.

The Index of Lagging Indicators dropped 0.3 percent to 97.0 in November following a decline of 0.1 percent in October to 97.3. October’s performance initially was estimated as a 0.2 percent increase.

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Associated Press Writer Jeannine Aversa contributed to this report.

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On the Net:

www.tcb-indicators.org

www.freddiemac.com

AP-ES-12-18-03 1509EST