Economy Index Jumps 2.1%--Best in 4 Years

WASHINGTON — The government’s chief measure of future economic activity surged 2.1% in December, the biggest jump in nearly four years, thanks largely to increases in building permits and a flurry of borrowing, the Commerce Department said today.

December’s index of leading indicators concluded a year in which the indicators rose nine of the 12 months, falling only in January, June and August. The index rose 7.2% from December, 1985, to December, 1986, compared to a 5.8% increase in the preceding 12 months.

“As a bellwether for future economic activity, today’s good news fits comfortably with the stock market’s New Year’s picture of very strong investment in American business,” White House spokesman Marlin Fitzwater said.

California deserves much of the credit for the December increase, economists said, as the state raised the cost of building permit fees effective Jan. 1, prompting builders to file permits early.

Increases in seven of the index’s 12 other categories also contributed to the jump.

Fourth Straight Increase

December’s jump marked the fourth straight increase for the index, which helps forecast the direction of the nation’s economy.

The index grew 0.2% in September, 0.7% in October and 0.9% in November, the Commerce Department said.

December’s 2.1% gain was the best since the index soared 3.1% in January, 1983.

The increase in the building permits index made up 0.55% of the total increase in the composite index, the department said.

Change in the amount of credit extended to businesses and consumers made up another 0.52%.

The other contributors were a rise in the average work week, an increase in new orders, more contracts and orders for plants and equipment, higher prices for sensitive materials, an increase in stock prices and a bigger money supply.

Two Negatives

The only negatives were a slight increase in state unemployment insurance claims and a decrease in net business formation.

Separate Commerce Department reports today said new home sales jumped a sharp 12.7% in December, giving the housing industry its best year since 1978, and orders for manufactured goods rose 1.2%.

The housing report indicated 749,000 new single-family homes were sold last year, an 8.9% increase from 1985 and the best sales figure since 1978.

Sales of new and existing homes were strong in 1986 as mortgage rates fell to their lowest levels this decade.

Orders placed to U.S. industry totaled $201.91 billion in December and followed a 3.6% increase in November.