Leading Economic Indicators in the U.S. Probably Fell in July

By Shobhana Chandra
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Aug. 21 (Bloomberg) -- The U.S. economic outlook darkened in July for a third consecutive month and manufacturing in the Philadelphia region contracted in August, reports today may show.

The Conference Board's index of leading indicators, a measure of the economy's direction over the next three to six months, fell 0.2 percent, according to the median forecast in a Bloomberg News survey. The Philadelphia Federal Reserve's gauge of manufacturing was probably less than zero for a ninth month.

The housing recession, rising job cuts and shrinking access to credit raise the risk that consumer spending will falter by year-end, bringing a halt to the economic expansion. As demand from abroad also weakens, the slowdown in manufacturing is likely to intensify.

``Growth will be very weak in the second half,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``There are big concerns about the stability of financial markets. We expect declines in consumer spending this quarter and next quarter.''

The leading index is due at 10 a.m. from the New York-based research group. Estimates in the survey of 63 economists ranged from a drop of 0.9 percent to a gain of 0.1 percent. The measure fell 0.1 percent in June.

The Philadelphia Fed's general economic gauge, also due at 10 a.m., is projected to come in at minus 12.6. Economists' forecasts ranged from minus 22.4 to minus 5, following a reading of minus 16.3 in July. Negative readings signal contraction. The measure averaged 5.1 last year.

Components

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 goods, bookings for capital equipment and the money supply adjusted for inflation.

Building permits, a sign of future construction, fell 18 percent in July, while work began on the fewest houses in 17 years, the Commerce Department reported this week. First-time claims for jobless benefits rose in July, and jumped to a six- year high earlier this month.

The slumping stock market also hurt the leading gauge, with the Standard & Poor's 500 index averaging 1257.3 last month, down from June's 1341.2.

At 8:30 a.m., a Labor Department report may show initial jobless claims fell to a level that still indicates the labor market is deteriorating. First-time applications for unemployment benefits decreased by 10,000 to 440,000 last week, according to the Bloomberg survey median.

Americans are spending less as firings mount. Target Corp., the second-largest U.S. discount retailer, said profit fell for the fourth straight quarter after consumers cut purchases of clothing and goods for the home.

``We do not see any indication of meaningful near-term improvement,'' Target's Chief Executive Officer Gregg Steinhafel said on a conference call this week.

Bloomberg Survey

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                           Initial   Philly      LEI
                            Claims      Fed
                            ,000's    Index     MOM%
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Date of Release              08/21    08/21    08/21
Observation Period        Aug. 16      Aug.     July
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Median                         440    -12.6    -0.2%
Average                        441    -13.2    -0.3%
High Forecast                  470     -5.0     0.1%
Low Forecast                   400    -22.4    -0.9%
Number of Participants          39       62       63
Previous                       450    -16.3    -0.1%
----------------------------------------------------------------
4CAST Ltd.                     445    -14.0    -0.7%
Action Economics               430    -10.0    -0.2%
AIG Investments               ---     -10.0    -0.3%
Aletti Gestielle SGR          ---     -12.0     ---
Argus Research Corp.          ---      -5.0    -0.1%
Banc of America Securitie     ---     -15.0    -0.3%
Bank of Tokyo- Mitsubishi     ---     -10.3    -0.4%
Bantleon Bank AG              ---     -14.0    -0.3%
Barclays Capital               450    -15.0     ---
BBVA                          ---     -18.0    -0.1%
BMO Capital Markets            445    -15.0    -0.2%
BNP Paribas                    458    -17.6    -0.2%
Briefing.com                   435    -12.0    -0.2%
Calyon                        ---     -12.0     ---
CFC Group                      445    -11.0    -0.2%
Citi                           450    -15.0    -0.5%
ClearView Economics           ---      -8.0     ---
Commerzbank AG                 450    -16.0    -0.1%
Credit Suisse                  430     ---     -0.6%
Daiwa Securities America      ---      ---     -0.4%
Danske Bank                   ---     -11.4     ---
DekaBank                      ---     -10.0    -0.2%
Desjardins Group               440    -12.0    -0.5%
Deutsche Bank Securities       450    -10.0    -0.2%
Deutsche Postbank AG          ---      ---     -0.4%
Dresdner Kleinwort            ---     -15.0    -0.3%
DZ Bank                       ---     -20.0     0.0%
First Trust Advisors           443    -15.3    -0.1%
Fortis                        ---     -15.0     ---
FTN Financial                 ---      -8.0     ---
Goldman, Sachs & Co.          ---      ---     -0.2%
H&R Block Financial Advis      440    -12.0    -0.2%
Helaba                        ---     -12.0    -0.4%
Horizon Investments           ---      -9.0    -0.3%
HSBC Markets                   430    -12.0    -0.3%
IDEAglobal                     440    -12.0    -0.1%
Informa Global Markets         440    -14.0    -0.2%
ING Financial Markets          450    -17.0    -0.2%
Insight Economics             ---     -20.0    -0.3%
Intesa-SanPaulo               ---     -15.0    -0.1%
J.P. Morgan Chase              425    -12.0     ---
Janney Montgomery Scott L     ---      ---     -0.2%
JPMorgan Private Client       ---     -16.5     0.0%
Landesbank Berlin              425    -12.0     0.0%
Landesbank BW                 ---     -15.5    -0.2%
Lehman Brothers                435    -17.0    -0.1%
Lloyds TSB                     400    -15.0    -0.2%
Maria Fiorini Ramirez Inc      460     ---     -0.2%
Merk Investments               425    -11.2     0.0%
Merrill Lynch                  470    -15.0    -0.6%
MFC Global Investment Man      430     ---      ---
Moody's Economy.com            445    -13.5     0.1%
Morgan Keegan & Co.           ---      ---     -0.3%
Morgan Stanley & Co.          ---      ---     -0.2%
National City Corporation     ---     -13.2    -0.7%
Nomura Securities Intl.       ---     -12.0    -0.9%
Nord/LB                        435    -14.0    -0.3%
Okasan Securities             ---      -8.5     ---
PNC Bank                      ---      ---     -0.5%
RBS Greenwich Capital         ---      ---     -0.5%
Ried, Thunberg & Co.           450     ---      ---
Schneider Trading Associa      425    -11.5    -0.2%
Scotia Capital                 460    -17.0     ---
Societe Generale               435    -11.0     ---
Standard Chartered            ---     -16.0     0.0%
Stone & McCarthy Research      430    -22.4    -0.7%
TD Securities                  440     -5.0    -0.1%
Thomson Financial/IFR          435    -11.0     0.0%
Tullett Prebon                 440    -12.0    -0.2%
UBS Securities LLC             448    -15.0    -0.8%
Unicredit MIB                 ---      ---      0.0%
University of Maryland        ---      ---     -0.2%
Wachovia Corp.                ---      ---     -0.7%
Wells Fargo & Co.             ---     -10.0    -0.2%
WestLB AG                     ---     -14.0    -0.3%
Westpac Banking Co.            450    -10.0    -0.8%
Wrightson Associates           450    -16.0     ---
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To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net