updated 10/20/2008 3:56:24 PM ET 2008-10-20T19:56:24

The economy’s health improved for the first time in five months in September as supplier deliveries and new orders strengthened, a private research group said Monday.

Major Market Indices

The New York-based Conference Board said its monthly forecast of future economic activity rose 0.3 percent, a better reading than the 0.2 percent drop expected by Wall Street economists surveyed by Thomson/IFR.

The index had fallen a revised 0.9 percent in August and 0.7 percent in July.

A one-time jump in the money supply as the federal government undertook a series of expensive bailouts helped September’s index, said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

In September, the government seized control of Fannie Mae and Freddie Mac, the largest funders of mortgages in the U.S. It made an $85 billion emergency loan to American International Group Inc. The Federal Reserve and central banks in Europe pumped $180 billion into money markets to free up lending between banks and the government undertook a $700 billion rescue of troubled bank assets.

“The trend is still downwards, and October’s index will plunge,” Shepherdson said. Down 3.3 percent for the year, the index is “consistent with recession, and it has not hit bottom yet.”

Ken Goldstein, a labor economist at the Conference Board, presented a slightly sunnier picture.

“Data on hand reflect a contracting economy, but not one in free fall,” Goldstein said. “More likely, what’s going in the financial market is a stretching of the recovery process — which could take a full year to develop.”

Six of the ten indicators that make up the leading index increased in September, including the money supply and the index of consumer expectations. The spread between long-term and short-term interest rates, an indicator of credit conditions, also narrowed. The negative contributors were building permits, unemployment claims, stock prices and weekly manufacturing hours.

The cutoff day for data in the index was Oct. 17.

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