By Courtney Schlisserman
July 21 (Bloomberg) -- The index of U.S. leading economic indicators may have fallen in June for the first time in four months, economists said before a private report today.
The Conference Board's gauge dropped 0.1 percent after increasing by the same amount in May, according to the median of 50 forecasts in a Bloomberg News survey. The measure points to the direction of the economy over the next three to six months.
The housing slump, now in its third year, higher food and energy prices and an increase in firings are likely to hurt growth. A slump in consumer spending in the second half of the year, as the boost from the government's tax rebates fades, threatens to bring the expansion to an end.
``It may very well be that GDP turns negative in the fourth quarter because of all the headwinds facing consumers that have been masked by the tax rebates,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. Gross domestic product is the value of all goods and services produced.
The Conference Board, a New York-based research group, is scheduled to issue its report at 10 a.m. Survey estimates ranged from a drop of 0.4 percent to a 0.3 percent gain.
Seven of the 10 indicators that make up the leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, supplier delivery times and factory hours. The Conference Board estimates the remaining three: new orders for consumer groups, bookings for capital equipment and the money supply.
Components Down
A rise in claims and declines in consumer expectations and stock prices were among the measures that dragged down the reading. Initial applications for jobless benefits averaged 390,500 a week, up from 368,800 in May.
The University of Michigan's consumer expectations index fell to 49.2 in June. A preliminary report on July 11 showed the measure dropped to a 28-year low of 48.3 this month. The Standard & Poor's 500 Index averaged 1341.25 in June, down from 1403.22 the prior month.
An unexpected jump in building permits prevented the leading index from falling even more. Applications, a sign of future construction, rose 12 percent in June as developers in New York City rushed to apply for, and start, new projects ahead of a change in building and tax codes.
The surge is likely to reverse this month. Excluding multi- family applications in the Northeast, permits would have risen just 0.7 percent, according to the Commerce Department.
Builder Confidence
Confidence among U.S. homebuilders dropped to a record low this month, a report from the National Association of Homebuilders/Wells Fargo last week showed. Readings on buyer traffic, current sales and projected sales six months from now also were at all-time lows.
Federal Reserve Chairman Ben S. Bernanke last week abandoned his June assessment that the threat of an economic downturn had diminished. During testimony before U.S. lawmakers in Washington, he said there are ``significant downside risks to the outlook for growth'' and ``upside risks to the inflation outlook have intensified.''
Bernanke cited higher energy prices, reduced access to credit and a further deepening in the housing recession as dangers to growth.
The government is scheduled to release its advance estimate on second-quarter GDP on July 31. Economists surveyed by Bloomberg News earlier this month projected the economy grew at a 1.5 percent annual rate from April through June as the rebate checks lifted consumer spending. Economists projected growth would slow to a 0.5 percent pace by the end of the year.
Rebates Fade
A Commerce Department report on July 15 indicated the effect of the tax rebates is already fading. Retail sales rose a less-than-forecast 0.1 percent in June, the report showed. The government distributed $91.8 billion in stimulus checks through July 11, out of a total plan of about $110 billion.
``We expect U.S. economic conditions and ongoing consumer concerns to continue to create challenges at least through the end of the year,'' Harley-Davidson Inc. Chief Executive Officer Jim Ziemer said in a statement July 17.
Harley-Davidson, the biggest U.S. motorcycle maker, said second-quarter profit fell 23 percent and sales in the U.S. declined 8.7 percent.
Bloomberg Survey
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LEI
MOM%
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Date of Release 07/21
Observation Period June
-------------------------------------
Median -0.1%
Average -0.1%
High Forecast 0.3%
Low Forecast -0.4%
Number of Participants 50
Previous 0.1%
-------------------------------------
4CAST Ltd. -0.4%
Action Economics -0.1%
Argus Research Corp. 0.0%
Banc of America Securitie -0.2%
Bank of Tokyo- Mitsubishi -0.2%
Bantleon Bank AG -0.2%
BBVA 0.1%
BMO Capital Markets -0.1%
BNP Paribas -0.1%
Briefing.com -0.3%
Citi 0.0%
Commerzbank AG -0.2%
Credit Suisse -0.2%
Daiwa Securities America -0.2%
DekaBank -0.1%
Desjardins Group -0.1%
Deutsche Bank Securities 0.1%
Deutsche Postbank AG -0.2%
Dresdner Kleinwort -0.2%
DZ Bank -0.1%
First Trust Advisors 0.0%
Helaba 0.0%
IDEAglobal 0.1%
Informa Global Markets -0.1%
ING Financial Markets -0.1%
Janney Montgomery Scott L -0.2%
JPMorgan Private Client 0.0%
Landesbank Berlin -0.1%
Landesbank BW -0.1%
Lehman Brothers -0.1%
Merk Investments -0.1%
Merrill Lynch -0.1%
Moody's Economy.com 0.1%
Morgan Stanley & Co. -0.1%
National City Corporation 0.3%
Newedge -0.2%
Nomura Securities Intl. -0.2%
Nord/LB -0.2%
PNC Bank -0.1%
RBS Greenwich Capital -0.1%
Standard Chartered -0.1%
Stone & McCarthy Research -0.4%
TD Securities -0.2%
Thomson Financial/IFR 0.1%
Unicredit MIB -0.4%
University of Maryland 0.0%
Wachovia Corp. -0.1%
Wells Fargo & Co. -0.1%
WestLB AG -0.1%
Westpac Banking Co. -0.2%
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To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
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