US economic momentum grows

There is growing optimism for a strong rebound

The recovery of the US economy could be much faster and stronger than expected, according to the latest data.

The Conference Board's index of leading economic indicators rose 0.6% in January, the largest gain in almost six years.

The cumulative rise is very positive and suggests gathering economic momentum

Ken Goldstein
Board's chief economist

It is the fourth consecutive month that the index has risen, raising expectations that the US economy will expand during the next three to six months.

While most economists agree that the US economy has passed through its worst, many have predicted that the rebound will be weak.

"The cumulative rise in the index over the past six months is very positive and suggests gathering economic momentum," said Ken Goldstein, the board's chief economist.

Growing optimism

The Conference Board attributed the economy's rebound to lower interest rates, falling energy prices and renewed optimism among consumers.

The index is designed to show the direction and pace of US economic growth in the next three to six months.

"The strong signal from the indicators is that the recession is ending and that the recovery could be more vigorous than earlier anticipated," Mr Goldstein said.

The rise exceeded gains predicted by Wall Street analysts.

And the index is now back above its pre-recession peak of January 2000.

Narrowing trade deficit

The news came on the same day as figures that revealed that the US trade deficit narrowed during 2001.

The gap between imports and exports shrank by 7.8% to $346.3bn during the year.

While reducing the trade deficit is normally seen as a positive thing, it appears to have happened for the wrong reasons in this case.

The weakness of the US economy led to a sharp cut in imports while US firms exported less due to the global slowdown.