Federal Reserve efforts to cut interest rates and pump money into the financial system have reverberated through the U.S. economy, making it more likely the recovery will be sustained, the Conference Board’s leading economic indicators index showed.

Nine of 10 components of the measure designed to gauge the outlook for growth for the next three to six months improved in November, the broadest advance in seven years, the New York-based research group reported today. For the first time since May 2009, the month before the recession ended, the spread between short- and long-term interest rates didn’t make the biggest contribution.

Falling claims for jobless benefit, rising consumer and business spending and increasing orders to factories, all reflected in the index, show the expansion is broadening. The gains mark the end of the initial phase of the rebound, when improvements in measures most influenced by the Fed, including interest rates and the money supply, swamped all others.

“This is what the Fed wants to see,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.

Biggest Contributor

The report showed a slowdown in supplier deliveries was the biggest contributor to the LEI’s growth, which signals that factories are having a more difficult time meeting demand. The yield curve, which reflects the interest-rate spread, and jobless claims showed the next-biggest improvements.

The yield curve has accounted for more than half of the LEI’s gain since the start of the recovery, said Ellen Zentner, senior U.S. macro economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Its average contribution has been 0.34 percentage point.

Money supply has added an average 0.04 percentage point to the gauge since June 2009 though it has been the second-biggest contributor to the index three times since April and tied for the biggest in May.

Zentner subtracted the yield curve and money supply adjusted for inflation from the leading indicators index and benchmarked it to December 2007, the start of the recession. On that basis, the measure rose 0.8 percent in November, the most since March and the second increase in eight months.

“By benchmarking it to 2007, you can show that right around when the Fed’s help began is when we entered recovery,” Zentner said. The recent gains excluding the yield curve and money supply suggest “growth has resumed outside of the Fed’s help.”

Bigger Gain

The leading index, with all its elements, rose 1.1 percent in November, the biggest gain since March.

The Fed’s Open Market Committee on Dec. 14 repeated its pledge to leave the benchmark interest rate low for an “extended period” and retained a $600 billion Treasury-purchase program through June. In a statement accompanying the announcement, policy makers said while the economic recovery is “continuing,” it is “insufficient” to bring down the unemployment rate.

Unemployment rose to 9.8 percent in November and has been at 9.5 percent or higher for 16 months, the longest stretch since monthly records began in 1948.

The economy is picking up speed and may grow by 3 percent to 3.5 percent next year, former Fed Chairman Alan Greenspan said in an interview late yesterday in Washington. The pickup in growth should lead to stepped-up hiring as the advancement in productivity tops out, he said.

Greenspan’s View

“The U.S. economy unquestionably has some momentum,” he said. “The fourth quarter looks good. The growth rate could be 3.5 percent or more” for the final quarter of this year.

The last time nine components of the leading index increased in one month was in October 2003, when the recovery from the 2001 recession picked up. The U.S. economy grew 3.6 percent in 2004, the most in four years, and the jobless rate fell a half percentage point to end at 5.5 percent.

Economists this week boosted their projections for fourth- quarter consumer spending after the government reported a bigger-than-forecast gain in November retail sales and revised prior months to show even larger increases. The increase in estimates was on top of earlier improvements to the 2011 outlook based on the tax compromise reached by President Barack Obama and congressional Republicans earlier this month.

The tax deal “makes us more optimistic with respect to growth in 2011,” economists at Credit Suisse in New York, said today in a research note. The analysts, led by Neal Soss, today raised their forecast for gross domestic product next year to 3.3 percent, a half percentage point more than the previous forecast.

“The economy has more momentum as it is,” they wrote. “The upgrade to our 2011 numbers arrives against a backdrop of steadily improving GDP growth readings in 2010.”

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