- The Washington Times - Tuesday, September 22, 2009

A private forecast of economic activity increased in August for the fifth month in a row, providing still more evidence that the longest, deepest recession since the Great Depression is probably over.

The index of leading economic indicators jumped 0.6 percent in August, according to a report Monday from the Conference Board, an economic research organization in New York.

The index is designed to forecast economic activity three to six months in advance. The current trend represents the longest string of increases in the index since 2004.

The Conference Board also reported that its index of coincident economic indicators, which is designed to track the movement of the economy in real time, was unchanged in August after a 0.1 percent increase in July.

“The Leading Economic Index has risen for five consecutive months, and the coincident economic index has stopped falling,” noted Ken Goldstein, an economist at the Conference Board. “Taken together, this suggests that the recession is bottoming out.”

Five of the 10 leading indicators provided a boost to the index in August. The positive contributors included longer supplier delivery times for manufacturers, a positive interest-rate yield curve, rising stock prices, an increase in building permits and a jump in the index of consumer expectations.

Financial markets drifted lower throughout the trading session Monday, as investors took some profits ahead of the Federal Reserve’s two-day rate-setting meeting that begins Tuesday.

The Dow Jones Industrial Average fell 41.34, or 0.4 percent, to 9,778.86, after earlier falling as much as 95 points.

The broader Standard & Poor’s 500 index fell 3.64, or 0.3 percent, to 1,064.66, while the tech-heavy Nasdaq composite index rose 5.18, or 0.2 percent, to 2,138.04.

Last week, Federal Reserve Chairman Ben S. Bernanke declared that the recession “is very likely over.” The Fed is expected to maintain short-term interest rates at the historically low levels that have prevailed since December, when the Fed lowered its overnight benchmark rate to between zero and 0.25 percent.

Since beginning its ascent in April, gains in the LEI components have become more widespread and the LEI’s six-month growth rate continued to accelerate last month.

“Viewed in isolation, this kind of performance would imply an explosive rebound and a traditional V-shaped recovery,” said Aaron Smith of Moody’s Economy.com. More likely, however, Mr. Smith said growth will be kept in check by the need of households to rebuild their financial positions, which were decimated by the deep recession and collapse in home prices.

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