Economic Index Rises 1.4% in June--Best in 18 Months : Gauge Taken as New Evidence of Sound Recovery

WASHINGTON — The government said today that its chief forecasting gauge of future economic activity shot up 1.4% in June, its best performance in 18 months.

The big advance in the Commerce Department’s Index of Leading Indicators provided fresh evidence that the current recovery, which has already lasted a peacetime record of 69 months, is in no danger of collapsing.

Economists said they were not concerned that the huge jump in June’s figure was a signal that the economy was in danger of overheating.

On the Rebound

They said the increase was in large part a rebound from May, when the index had dropped by a sharp 0.8%.

The June advance was the biggest one-month gain since the index rose by 2.2% in December, 1986. It was the latest in a string of reports reflecting better than expected economic growth this year.

The government said last week that the economy, as measured by the gross national product, expanded at a 3.1% annual rate from April through June. This robust growth helped push the unemployment rate down to a 14-year low of 5.3% in June.

This performance was a far cry from the recession that many analysts were predicting in the wake of last October’s stock market crash.

Advances Recorded

In June, the strength in the leading index was widespread, with seven of the available nine components registering advances.

The biggest source of strength came from a 5.7% rise in stock prices in June. Other strong factors were a slowdown in business deliveries, considered a sign of increasing demand; an increase in plant and equipment orders; a drop in unemployment claims; an increase in building permits; a change in raw materials prices and a rise in the money supply.

One indicator, orders for consumer goods, was a negative factor on the index and one other indicator, the length of the average workweek, was unchanged in June.

In a separate report today, the Commerce Department said orders to U.S. factories for manufactured goods, powered by a big jump in demand for civilian and military aircraft, climbed 5.5% in June, the largest increase in more than 17 years.

The department said orders for both durable and non-durable goods hit a record $229.84 billion in June following a 0.7% decline in May. The strong rise reflected big orders for civilian and military aircraft and a big jump in demand for military ships and tanks.