WASHINGTON (AP)—The government’s chief economic forecasting gauge shook off the October stock market slump to post a 0.9 percent increase in February in a performance which analysts said should lay to rest fears of a 1988 recession.

In a second upbeat economic report Tuesday, the government said that sales of new homes, which had fallen for three consecutive months, shot up 20.3 percent in February, the biggest monthly gain in almost two years.

Weakness in home sales and in the Index of Leading Economic Indicators in the months following the Oct. 19 stock market crash had raised fears that the five-year-old economic recovery was in imminent danger of collapsing.

Housing is often the first sector to weaken in a new downturn and the index of leading indicators is designed to forecast turning points in the economy. For that reason, the February rebounds in both were greeted as good news by economists.

“I think we can pretty well bury the recession fears,” said Robert Dederick, executive vice president of Northern Trust Co. of Chicago.

The 0.9 percent rise in the leading index was the biggest advance since a 1 percent rise last June. The index had fallen in three of the past four months, including declines of 0.1 percent in October, 1.2 percent in November and 1.1 percent in January.

Only a 0.4 percent increase in December kept the index from posting a string of three or more consecutive declines, which is often viewed as a harbinger of a recession.

Analysts said the declines were correctly signalling slower growth this year than in 1987. But they said the economy should strengthen as it moves into the spring.

Lyle Gramley, of the Mortgage Bankers Association, predicted the economy, as measured by the gross national product, would rise 2.7 percent this year, an even more optimistic outlook than the administration’s prediction of 2.4 percent growth.

More than half of the strength in the leading index in February came from a big jump in building permit applications.

In the report on home sales, the Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 628,000 units last month, the first advance since October and the biggest gain since March 1986.