The government said Friday that its chief economic forecasting gauge reversed course in February and surged upward by 1.1 percent, the biggest gain in nearly three years.
Private economists called the rise in the Commerce Department's Index of Leading Economic Indicators the clearest signal yet that better days are ahead for the U.S. economy, although there was disagreement about just how soon the recession will be over.Some analysts said they believed the downturn is already over. They noted a second government report Friday showing that sales of new homes jumped 16.2 percent in February, the biggest advance in nearly five years.
An upturn in housing normally leads the economy out of a recession, and many analysts said this recovery will be no different.
"All of our measurements of buyer traffic, current sales activity and builder sentiment have brightened substantially in the past two months," said David Seiders, chief economist of the National Association of Home Builders.
"It is pretty clear that the housing market has started to move upward and that should give us an end to the recession by midyear," he said.
Lynn Reaser, senior economist at First Interstate Bancorp of Los Angeles, was even more optimistic, saying she believed there was a good chance that February will be marked as the month the recession ended.
"This recession was caused by two major negatives: a tight monetary policy by the Federal Reserve and the Persian Gulf war, which caused consumer confidence to plummet," she said. "Those two negatives have now been lifted, and we are seeing the signs of a turnaround."
But Richard Rahn, chief economist of the U.S. Chamber of Commerce, said he believed the current recession might well last into the fall. He noted that the leading index often turns up well ahead of an end to the recession. It had started to rise a full nine months before the end of the previous downturn in 1981-82.
"Although some parts of the economy such as housing are bouncing back, the overall economy continues to decline," he said.
Three-fourths of the February increase in the leading index came from a big jump in stock prices during the month and from a rise in consumer confidence.
Stock prices have backtracked slightly in March but still remain well above their lows of October. Consumer confidence took another big leap in March with the end of the war.
Other sources of strength in February were the first gain in home building permits in eight months, a pickup in growth in the nation's money supply, an increase in consumer goods orders, a rising backlog of unfilled manufacturing orders and changes in raw materials prices.