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DIRECTION OF THE ECONOMY

March 1, 1984



The index of leading indicators, which economists use in an attempt to predict the direction of the nation's economy, registered a sizable gain Wednesday. The Commerce Department index was up 1.1 percent in January; it had risen only 0.1 percent in December.

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That indicates the economy will probably remain strong for some months to come. An increase in building permits, growth in the average workweek, and improvement in new orders for consumer goods led the 12 components of the index, which rose from 162.9 points in December to 164.7 in January. The index is based on a 1967 value of 100.

A small part of the gain was attributed to the index of 500 common stock prices. These soared in early January, but since then they have plummeted, to date losing 12 percent of their January value.

Even so, the index signaled a strong economy ahead. Although most Americans should benefit from that, an expanding economy can be inflationary. The January figures, therefore, could decrease the likelihood the Federal Reserve will ease credit and bring about lower interest rates. Such a prospect might have a negative impact on stock and bond markets.