- The Washington Times - Thursday, March 19, 2009

NEW YORK (AP) - A private sector group’s monthly forecast of economic activity likely dropped in February after two months of unexpected increases, which were mainly due to the federal government’s pumping money into the economy

The New York-based Conference Board’s index of leading economic indicators _ designed to forecast economic activity in the next three to six months based on 10 components _ is expected to drop 0.6 percent, according to analysts surveyed by Thomson Reuters.

The index rose 0.4 percent in January, beating expectations, and notched a 0.2 percent gain in December.

In the six-month span through January, however, leading indicators dropped 1.9 percent.

The index’s 10 components include stock prices, money supply, building permits, average weekly initial claims for jobless insurance, new orders by manufacturers and an index of consumer expectations.

The February index is scheduled to be released Thursday at 10 a.m. EDT.

Conference Board economist Ken Goldstein last month said the recession may begin to ease up in the coming months, but growth in the second half of this year will be “anemic.”

Most of the recent improvement in the index has been due to government actions to jump-start lending.

The Federal Reserve has taken unprecedented steps to boost liquidity in credit markets and encourage new loans as its key lending rate_ now at a record low between zero and 0.25 percent _ has no room left for cuts to prompt economic activity.

The Fed on Wednesday said it would spend up to $300 billion to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. The central bank also will spend another $750 billion on mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, bringing its total purchases of those securities to $1.25 trillion.

The Fed kept the key short-term rate at a record low, but also is rolling out its Term Asset-Backed Securities Loan Facility, which would provide up to $200 billion to investors to buy up consumer loans. The government says it could spark up to $1 trillion in new lending for businesses and consumers.

Still, most other indicators in the Conference Board’s index _ including jobless claims, stock prices and building permits for new construction _ have been weak in recent months.

The Labor Department last week reported that new requests for jobless benefits rose to 654,000, while people continuing to file unemployment insurance claims rose 193,000 to 5.3 million, the largest amount on records dating to 1967.

And mass layoffs persist. United Technologies Corp. this week said it may eliminate up to 3,000 more jobs on top 11,600 cuts announced earlier this month. Elsewhere, HSBC PLC, Europe’s largest bank, announced plans to shut down its U.S. lending unit in March, eliminating 6,100 American jobs.

Unemployment stands at 8.1 percent, the highest rate in more than a quarter-century.

However, the Commerce Department said this week that building permit applications last month rose 3 percent to an annual rate of 547,000, sparking hope from some economists of a possible recovery beginning in the battered real estate sector. However, February’s figure was only a slight improvement on the record low rate of 521,000 in January.

And while stock prices, as indicated by the Dow Jones industrial average, enjoyed a rare 4-day rally last week, they have lost nearly half their value since their peak in October 2007.

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