THE STRENGTHENING ECONOMY : Recovery Gaining Strength, Flurry of Reports Suggest : Commerce: Economic indicators, a key barometer of manufacturing activity and construction spending, all rise.

The U.S. economy showed new signs of awakening from a long, fitful slumber Tuesday, with the government’s leading forecasting gauge pointing to an upturn after President-elect Bill Clinton takes office next year.

The October jump in the index of leading economic indicators was accompanied by the release Tuesday of other economic data that highlighted new vitality in the nation’s factories and a pickup in construction to the highest level in more than two years.

The details buttressed the growing view among economists that the economy has been getting stronger since summer, a shift illustrated by busier Christmas shopping and improved spirits among consumers in much of the country.

“The signs are multiplying that a recovery is underway--finally,” said Bruce Steinberg, an economist with Merrill Lynch in New York.

The index of leading economic indicators, a grab-bag of clues about the state of the economy, rose 0.4% in October after falling in three of the last four months. The barometer, which is prepared by the Commerce Department, is intended to forecast economic activity six to nine months in advance.

In October, it was pushed upward by a drop in new claims for unemployment benefits, an increase in the average workweek of manufacturing employees and a jump in unfilled orders at factories. Overall, six of the 11 indicators that make up the index were positive.

A separate gauge of the manufacturing economy, prepared by the National Assn. of Purchasing Management, jumped to 55% in November from 50.6% in October. A reading above 50% suggests an expanding manufacturing economy.

The factory executives’ report pointed to new orders within a broad range of U.S. industries, from plastics to electronic gear, and suggested growing strength in the industrial heartland of the Midwest.

Economists were especially interested in the factory report, because it is one of the first economic gauges to be released each month.

“The most important number today was the purchasing managers’ report,” said David Wyss, an economist with DRI-McGraw Hill in Lexington, Mass. “It suggests the manufacturing economy is beginning to turn around.”

The Commerce Department also reported Tuesday that construction spending on private and public projects rose 1% in October to a seasonally adjusted annual rate of $429.3 billion.

The rise came atop a revised 1.8% climb in September, which was the strongest gain in seven months. New-home building fueled the October increase, as the seasonally adjusted annual rate of residential construction rose to $187.4 billion.

Analysts Tuesday pored over the new data in an effort to determine whether the U.S. economy was reliably embarked on a brisker path of growth--or if the recent signs of strength might peter out early next year. The recovery, which appears to have begun in early 1991, has flattened out twice since then. For the most part, it has crept along at rates far slower than other post-World War II recoveries.

Lingering weakness in the Southern California economy and an uncertain employment picture nationally continue to raise doubts about the strength of the recovery.

On the minus side Tuesday, the October leading index showed that prices of raw materials had slipped, a sign of weaker demand; business delivery times fell, suggesting that companies had less trouble in keeping up with demand, and stock prices declined, as measured by the Standard & Poor’s 500.

Still, a whole range of signs from the last few weeks--including gains in consumer confidence, retail sales and factory production--suggest to many that the picture is improving.

“The question is whether the recovery will be sustainable this time,” said Merrill Lynch’s Steinberg, noting the pattern of false takeoffs since early 1991. “My judgment is that it’s the real thing, and we should have some firmer growth in 1993.”

For example, the recent decline in new claims for unemployment insurance could foreshadow a stabilizing jobs picture, economists said. Further evidence will come Friday, when the U.S. Labor Department reports the November unemployment rate.

“There’s no question that in the last month we’ve seen much better economic news,” Wyss said. “It came too late to help George Bush, but the economy does seem to be moving into second gear.”

The Outlook Brightens

The government’s key gauge of economic trends, along with construction spending and measure of manufacturing activity, all rose strongly in October, adding to hopes that the economy may be gathering strength.

Purchasing Management Index

Nov. 1991: 50.3%

Nov. 1992: 55.0%

The purchasing manager’s index tracks overall business activity at 300 industrial companies.

Construction Spending

Billions of dollars, seasonally adjusted.

Oct. 1992: 429.3

Index of Leading Indicators

Seasonally adjusted index 1982=100

Oct. 1992: 149.1

Source: National Assn. of Purchasing Management, U.S. Dept. of Commerce