An important gauge of future U.S. economic activity rose 0.3 percent in October, though analysts cautioned it was premature to suggest the slumping economy is poised to rebound.

The New York-based Conference Board said Tuesday its Index of Leading Economic Indicators edged up to 109.4 in October, following a 0.5 percent decline in September and a 0.1 percent drop in August. 

The index indicates where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year. Analysts were expecting no change. 

The economic fallout from the Sept. 11 attacks in New York and Washington was responsible for the precipitous decline in September, said Conference Board economist Ken Goldstein. 

But that drop, the largest one-month decrease since January 1996, wouldn't have been as sharp absent the attacks, thereby improving the October reading, he said. 

"If (the attacks) make September look worse, it would then follow that they're making October look better than it actually was," added Goldstein, saying it is still too early to suggest that the economy is bottoming out. 

Goldstein said the housing and labor sectors, two components of the index, continued to struggle in October. But that weakness was offset by a recent rise in stock prices and the Federal Reserve's interest rate cutting campaign, he said. 

The central bank has cut rates 10 times this year to shore up the economy, and is expected to enact another reduction when it meets next month. Economists believe the United States was already teetering on a recession before the attacks, marked by the sagging stock market, hundreds of thousands of layoffs and poor corporate earnings. 

But Michael Swanson, senior economist at Wells Fargo & Co. in Minneapolis, downplayed the impact of the Fed's actions. 

"We can control monetary policy, but that doesn't necessarily make people feel better off instantaneously," Swanson said. "What we can't control and what people put more value on is employment and factory orders." 

In a separate report released earlier Tuesday, the Commerce Department said the U.S. trade deficit narrowed by a record amount in September to $18.7 billion. Although the deficit in manufactured goods rose, it was offset by huge payments by foreign insurance companies due to the attacks. 

The markets were lower following the release of the reports amid some profit-taking, with the Dow Jones industrial average down 68 points at 9,909 and the Nasdaq composite index off 27 points at 1,908. 

The board said seven of the 10 components of the leading index contributed to its increase in October: vendor performance, interest rate spread, money supply, stock prices, manufacturers' new orders for consumer goods and materials, manufacturers' new orders for nondefense capital goods and index of consumer expectations. 

Average weekly initial claims for unemployment insurance, average weekly manufacturing hours and building permits were the only negative components in the index. 

The coincident index, which measures current economic activity, fell 0.2 percent to 116.5 in October after being essentially flat for two months. The index of lagging indicators, which reflects changes that have already occurred, slipped 0.3 percent in October to 103.6 after a 0.2 percent decline in September. 

The Conference Board is a nonprofit research and business group, with more than 2,700 corporate and other members around the world.