ECONOMIC REPORT
Leading indicators show no quick recovery
Forward-looking gauge falls 0.7% in July, Conference Board says
By
Rex Nutting, MarketWatch
Last update: 11:41 a.m. EDT Aug. 21, 2008
WASHINGTON (MarketWatch) -- U.S. leading economic indicators fell 0.7% in July, pointing to "slow growth the rest of the year, and possibly an economy grinding to a halt," the Conference Board reported Thursday.
"If there's a second-half recovery, it'll be the second half of 2009," said Ken Goldstein, labor economist at the private research organization. "The recent decline in gas prices isn't enough to overcome all the negative momentum that's been building up."
Five of the 10 indicators declined in July, led by building permits, stock prices and jobless claims. Three of the indicators rose, led by the interest-rate spread and consumer expectations.
The large decline in the index in July overstates the deterioration in the economy, analysts said. The building permits and jobless claims data were distorted by one-time factors. Excluding those factors, the index maintained its modestly negative trend.
"The decline in the leading index should therefore not be interpreted as a sign the outlook is quickly deteriorating," said Zach Pandl, an economist for Lehman Bros.
In a separate report, the Labor Department said first-time filings for unemployment benefits fell by 13,000 last week, with the trend in the data still masked by a boost in claims sparked by a new federal program of benefits. More than 1.25 million people have applied for the extra 13 weeks of federal benefits, the government said.
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In another release, the Philadelphia Fed said its manufacturing index improved to negative 12.7, the ninth consecutive month of worsening factory activity in the region.
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In the past six months, the leading index has fallen at a 1.8% annual rate, with seven of the 10 indicators falling over that period. The index was flat in June.
The coincident index rose 0.1% in July. In the past six months, the coincident index (which includes the four indicators used to judge whether the economy is in recession) fell 0.4%, with
all four indicators dropping.
The leading index is designed to forecast turning points in the economy.
Together, all three indexes "suggests the risks for further economic weakening in the near term remain elevated."
