Jan. 23 (Bloomberg) -- An index of leading U.S. economic indicators rose last month for the first time since September, as job growth and rising stock prices pointed to a strong start for 2007.

The 0.3 percent increase in the Conference Board's measure came after no change in November, previously reported as a 0.1 percent gain, the New York-based group said today. The gauge points to the direction of the economy over the next three to six months.

A buoyant stock market and steady wage gains encouraged consumers to keep spending, helping the economy overcome weakness in housing and auto production. Quickening growth without a pickup in inflation will give Federal Reserve policy makers leeway to hold interest rates at current levels in coming months.

``Where they stand at the moment is probably right where they want to be,'' Ryan Reed, an economist at National City Corp. in Cleveland, said before the report. ``The economy is just performing better than expected in a general sense.''

Economists projected the index would rise 0.2 percent, according to the median of 60 estimates in a Bloomberg News survey. Forecasts ranged from no change to a gain of 0.6 percent.

After the report, the benchmark 10-year U.S. Treasury note yielded 4.78 percent, up 2 basis points.

Annual Revisions

The Conference Board's report included its annual revisions to the index, which resulted in lower readings for the prior two months.

``The latest data for the leading economic index is pointing to continued moderate growth, or even a little acceleration,'' Ken Goldstein, labor economist at the Conference Board, said in a statement. ``The combination of income growth and lower energy prices might spark a little more economic activity this spring.''

The Commerce Department is scheduled to release its advanced report on fourth quarter gross domestic product on Jan. 31. Economists surveyed by Bloomberg News Jan. 2 to Jan. 8 raised their forecast for expansion during that period to a median of 2.5 percent, from 2 percent a month earlier.

Some economists have further raised their fourth-quarter growth projections since the last Bloomberg survey was taken, as reports showed greater labor market strength and consumer spending. First-quarter GDP may also be better than forecast, said John Shin, an economist at Lehman Brothers Holdings Inc. in New York.

GDP Forecast

``We think that the risks to our first-quarter GDP forecast are to the upside,'' Shin said. Lehman currently projects first- quarter growth of 2.5 percent.

Six of the 10 indicators in today's report had a positive effect on the index. Jobless claims averaged 316,500 in December, down from 328,600 a month earlier. They added 0.12 percentage point to the leading indicators index.

The labor market is ``going gangbusters' and presents a ``serious risk'' to inflation, Federal Reserve Bank of San Francisco President Janet Yellen said in a speech in Scottsdale, Arizona on Jan. 17. ``Growth has slowed to a bit below most estimates of the economy's long-run potential, while the risk of an outright downturn has receded.''

Fed policy makers are scheduled to next vote on the direction of the benchmark overnight lending rate between banks on Jan. 31. The Fed has left the rate at 5.25 percent since June after 17 straight increases.

Money Supply

Money supply adjusted for inflation, which has the biggest weighting in the index, added 0.08 percentage point. The average of the Standard & Poor's 500 index averaged 1416.4 last month, up from 1388.6 in November, and added 0.08 percentage point to the leading indicators index.

Other factors that boosted the leading index include building permits, which rose 5.5 percent last month and added 0.14 percentage point to the Conference Board's measure, and vendor performance, which added 0.04 percentage point.

Warmer-than-average weather in December helped boost housing starts and building permits, economists said.

While new and existing home sales have increased in recent months, builders say the housing market hasn't improved much.

``Market conditions have continued to be difficult,'' Lennar Corp. Chief Executive Officer Stuart Miller said on a conference call on Jan. 17. Even so, profits this year may rise as long as economic growth remains strong, primarily because of cost cuts, he said.

Home Sales

Miami-based Lennar is the fourth-biggest U.S. homebuilder. The Commerce Department is scheduled to release its report on December new home sales on Jan. 26. The National Association of Realtors will report existing home sales the day before.

Elements that weighed on the leading indicators index included consumers' worsening outlook on the economy, as measured by the University of Michigan. The consumer expectations gauge fell in December to 81.2, from 83.2 a month earlier, and subtracted 0.06 percentage point from the leading economic indicators index.

The yield curve, or the difference in yield between short- term and long-term Treasury securities, subtracted 0.07 percentage point from the index. The manufacturing workweek, which was the same in December as in November, had no effect on the Conference Board gauge.

Seven of the 10 economic indicators that make up the index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, supplier delivery times and factory hours.

The Conference Board estimates money supply, new orders for consumer goods and orders for non-defense capital goods. Orders for non-defense capital goods added 0.01 percentage point to the index, today's report showed.

Strength in Orders

Some companies are seeing strength in orders.

Microsoft Corp. Chief Executive Officer Steve Ballmer said on Jan. 17 that sales of the company's Windows Vista software to businesses may exceed his initial estimates. Microsoft, the world's largest software maker, released Vista for corporate customers on Nov. 30 and plans to introduce it to consumers on Jan. 30.

``We're very excited about where we are out of the chute with Windows Vista,'' Ballmer said in an interview in New York. He said it looks like early sales will be better than he previously expected.

The Conference Board's index of coincident indicators, a gauge of current economic activity, rose 0.2 percent in December for a third month. The index tracks payrolls, incomes, sales and projections.

The gauge of lagging indicators rose 0.9 percent following a 0.6 percent increase. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: January 23, 2007 10:07 EST