By Bob Willis
Sept. 18 (Bloomberg) -- The index of U.S. leading economic indicators probably fell in August for a third month, signaling the growth outlook darkened even before the latest collapse in financial markets, economists said before reports today.
The Conference Board's gauge, 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. Another report may show manufacturing in the Philadelphia region contracted in September for a 10th month.
The three-year housing slump that triggered the credit- market crisis, a loss of jobs and slowdown in spending may bring an end to the economic expansion. Plunging stock markets this month following the collapse of Lehman Brothers Holdings Inc. and federal takeover of American International Group Inc. reflect a breach of confidence that is likely to deepen the downturn.
``Odds are high that the economy will post a negative quarter or two through the first half of next year,'' said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. ``The financial system is in turmoil.''
The leading index is due at 10 a.m. from the New York-based research group. Estimates in the survey of 57 economists ranged from a drop of 0.6 percent to a gain of 0.2 percent. The measure fell 0.7 percent in July.
Also at 10 a.m., the Federal Reserve Bank of Philadelphia's factory gauge is projected to come in at minus 10, following a reading of minus 12.7 in August. Negative numbers signal contraction. Forecasts ranged from minus 15 to minus 5. The measure averaged 5.1 last year.
Jobless Claims
A Labor Department report at 8:30 a.m. may show initial jobless claims were little changed last week at a level that indicates the labor market is deteriorating. First-time applications for unemployment benefits decreased by 5,000 to 440,000, according to a Bloomberg survey median.
Seven of the 10 components of the leading index are known ahead of time: jobless claims, stock prices, 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.
Economists surveyed by Bloomberg in the first week of September anticipated the longest expansion in consumer spending on record will come to an end this quarter. Purchases will probably stall, according to the survey median, the weakest reading since the last three months of 1991.
Housing Slump
The housing slump is deepening, threatening the financial system and leading to this week's government takeover of AIG and Lehman's bankruptcy.
Building permits, a sign of future construction, fell 8.9 percent in August, while work began on the fewest houses in 17 years, the Commerce Department reported yesterday.
In a sign of weakness in manufacturing, the average factory employee worked 40.9 hours a week in August, the fewest in more than a year, the Labor Department reported this month. The economy has lost 605,000 jobs so far this year and the jobless rate reached a five-year high of 6.1 percent in August.
More dismissals may be on the way. Chrysler LLC's Chief Executive Officer Bob Nardelli said the automaker may need to cut more jobs and trim other costs should U.S. lawmakers fail to approve $25 billion in loans to help the industry develop fuel- efficient vehicles.
Nardelli said he hadn't ``seen any signs'' of a U.S. economic recovery, during a Sept. 12 interview. ``It's critically important that we get this economy re-fired, that we get the energy back into this economy, that we get consumer confidence back in,'' he said.
Higher stock prices in August prevented the leading index from dropping even more, an underpinning unlikely to be repeated this month, economists said. The Standard & Poor's 500 index averaged 1,234.96 in the first 17 days of September, down 3.6 percent from 1281.47 in August.
Bloomberg Survey
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Initial Philly LEI
Claims Fed
,000's Index MOM%
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Date of Release 09/18 09/18 09/18
Observation Period Sept. 6 Sept. Aug.
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Median 440 -10.0 -0.2%
Average 439 -10.3 -0.2%
High Forecast 450 -5.0 0.2%
Low Forecast 420 -15.0 -0.6%
Number of Participants 38 56 57
Previous 445 -12.7 -0.7%
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4CAST Ltd. 450 -10.0 -0.2%
Action Economics 445 -8.0 -0.2%
Aletti Gestielle SGR --- -15.0 ---
Argus Research Corp. --- -5.0 0.0%
Banc of America Securitie --- -11.0 -0.2%
Bank of Tokyo- Mitsubishi --- -9.7 -0.5%
Bantleon Bank AG --- -13.0 -0.2%
Barclays Capital 440 -9.0 ---
BMO Capital Markets 440 -10.0 -0.2%
BNP Paribas 440 -10.0 -0.2%
Briefing.com 440 -10.0 -0.2%
Calyon --- -9.0 ---
CFC Group 442 -10.5 -0.2%
Citi 435 -9.0 -0.6%
Commerzbank AG 435 -10.0 -0.2%
Credit Suisse 430 --- -0.2%
Daiwa Securities America --- --- -0.3%
Danske Bank --- -9.0 ---
DekaBank --- -9.0 -0.2%
Desjardins Group 449 -10.0 -0.2%
Deutsche Bank Securities 445 -13.0 -0.2%
Deutsche Postbank AG --- --- -0.4%
Dresdner Kleinwort --- -7.0 -0.3%
DZ Bank --- -14.0 -0.2%
First Trust Advisors 441 -10.6 -0.1%
Fortis --- -10.0 ---
FTN Financial --- -11.0 -0.5%
Goldman, Sachs & Co. --- --- -0.2%
H&R Block Financial Advis 440 -8.0 -0.2%
Helaba --- -9.0 -0.4%
High Frequency Economics 445 -10.0 -0.2%
HSBC Markets 430 -12.0 -0.2%
IDEAglobal 435 -10.0 -0.2%
Informa Global Markets --- -9.0 -0.2%
ING Financial Markets 440 -13.0 -0.3%
Insight Economics 435 -10.0 -0.3%
Intesa-SanPaulo --- -10.0 ---
J.P. Morgan Chase 445 -12.0 ---
Janney Montgomery Scott L --- --- -0.3%
JPMorgan Private Client --- -10.0 0.2%
Landesbank Berlin 430 -12.0 -0.5%
Landesbank BW --- -11.5 -0.2%
Lehman Brothers 440 -9.9 0.0%
Lloyds TSB 440 -10.0 -0.3%
Maria Fiorini Ramirez Inc 440 --- -0.3%
Merk Investments 440 -10.0 -0.2%
Merrill Lynch 432 -10.0 -0.5%
Moody's Economy.com 450 -12.0 -0.4%
Morgan Stanley & Co. --- --- -0.2%
National City Corporation --- -13.6 0.1%
Nomura Securities Intl. --- -10.0 -0.4%
PNC Bank --- --- 0.0%
RBS Greenwich Capital --- --- -0.4%
Ried, Thunberg & Co. 435 -12.5 ---
Schneider Trading Associa 420 -8.0 -0.3%
Societe Generale 440 -12.0 ---
Standard Chartered --- -12.0 ---
Stone & McCarthy Research 440 -7.7 -0.4%
TD Securities 430 -10.0 -0.3%
Thomson Financial/IFR 440 -9.2 -0.1%
UBS Securities LLC 445 -15.0 -0.2%
Unicredit MIB --- --- -0.5%
University of Maryland 429 --- -0.2%
Wachovia Corp. --- --- -0.1%
Wells Fargo & Co. 425 -8.0 -0.2%
WestLB AG --- -10.0 -0.2%
Westpac Banking Co. 450 -5.0 -0.4%
Wrightson Associates 435 -12.5 ---
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To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
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