Another Storm Cloud For Economy

"Slumdog Millionaire" child star Azharuddin Mohammed Ismail, 10, left greets director Danny Boyle as he leaves after a press conference in Mumbai, India, Wednesday, May 27, 2009. AP Photo/Rajanish Kakade

A key indicator of U.S. economic activity fell for a third straight month in August, signaling a threat of economic slowdown, a private research firm said on Monday.

The Conference Board said the U.S. index of leading economic indicators fell 0.2 percent in August after a revised 0.1 percent drop in July and a 0.2 percent fall in June.

The July index was initially reported as down 0.4 percent.

The August drop was larger than expected. Wall Street economists had forecast an 0.1 percent decline.

Three straight monthly declines in the leading index are generally considered by economists as a sign of economic recession.

"There is now the threat of a slowdown, because unlike in June or July, the latest decline was widely diffused -- only one of the 10 components had a significant positive contribution," said Ken Goldstein, the board's chief economist.

The coincident index, which gauges current economic trends, rose 0.1 percent in August after being unchanged in July and up 0.3 percent in June.

"The coincident index shows an economic recovery, but there is a danger that even this weak recovery could stall, especially if the consumer market starts to slow," Goldstein said.

Seven of the 10 components that make up the leading indicators index were negative in August, led by the Treasury yield curve and initial jobless claims.

Of the other three, money supply was the strongest positive contributor. The average workweek and stock prices also posted positive readings in August.

The U.S. economy is "not getting any thrust from capital spending at this point," said Bill Barker, investment strategy consultant at RBC Dain Rauscher in Dallas.

Barker said consumer spending has held up surprisingly well in recent months, with purchases of big-ticket items such as cars and homes leading the way.

His fear is that consumer confidence will erode as the stock market continues to sputter and that increased talk of war with Iraq will keep more people in front of their televisions instead of out shopping.
  • Dan Collins

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