Economy: Leading index signals deeper slowdown

By Bloomberg

The U.S. economic slowdown will deepen in the second half of the year as housing continues to slump and unemployment rises, according to a measure designed to predict the economy's direction.

The Conference Board's index of leading indicators, released Thursday, fell 0.7 percent in July, more than triple the drop forecast by economists surveyed by Bloomberg News. Separate reports Thursday showed the number of Americans collecting unemployment insurance remained near a five-year high last week and manufacturing in the Philadelphia region shrank for a ninth straight month.

"The economy has really shown one sign after another of weakening," Martin Feldstein, a Harvard University economist, said in a Bloomberg Television interview in Jackson Hole, Wyo., where he's attending an annual Federal Reserve conference. Feldstein said he is "much more pessimistic than a year ago" about the outlook.

The Conference Board's index was forecast to decline 0.2 percent, according to the median of 63 economists in a Bloomberg News survey.

Sagging orders and falling sales hurt factories in the Philadelphia region this month, a report from the Federal Reserve Bank of Philadelphia showed. Its general economic index rose to minus 12.7 from minus 16.3 in July. Negative readings signal a decline. The measure averaged 5.1 last year.

First-time claims for jobless benefits took away 0.23 percentage point from the leading index. Claims rose to an average 420,800 in July, and jumped to a six-year high earlier this month.

Earlier Thursday, a Labor Department report showed initial jobless claims fell to 432,000, a level that still indicates the labor market is deteriorating.

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