Aug. 21 (Bloomberg) -- The index of leading U.S. economic indicators fell in July by the most in almost a year, reinforcing the darkening outlook for growth.
The Conference Board's gauge dropped 0.7 percent, more than forecast and the biggest decline since August 2007, after an unchanged reading in June, the New York-based group said today. The index points to the direction of the economy over the next three to six months.
The worst housing recession in a quarter century, rising job cuts and shrinking access to credit raise the risk that consumer spending will falter by year-end, bringing the economic expansion to a halt. A separate report showed manufacturing in the Philadelphia region shrank in August for a ninth month.
The numbers are ``consistent with the weak economy right now, probably an economy in recession,'' James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said in a Bloomberg Television interview.
The index was forecast to decline 0.2 percent, according to the median of 63 economists in a Bloomberg News survey, after an originally reported drop of 0.1 percent in June. Estimates ranged from a decline of 0.9 percent to a gain of 0.1 percent.
Orders, Sales
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.
The leading index decreased at a 1.8 percent annual pace over the past six months. A decline of around 4 percent to 4.5 percent at an annual pace is one signal a recession is imminent, according to the Conference Board. The gauge met that requirement in January, when it dropped at a 4.7 percent pace.
Five of the 10 indicators in today's report subtracted from the index, led by declines in building permits and stock prices.
Housing subtracted 0.53 percentage point. 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.
A 0.25 percentage point drag came from the Standard & Poor's 500 index, which averaged 1257.3 last month, down from June's 1341.2.
Jobless Claims
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 today, a Labor Department report showed initial jobless claims fell to 432,000, a level that still indicates the labor market is deteriorating.
A decline in orders for consumer goods and a drop in the money supply adjusted for inflation, which has the biggest weighting, also hurt the leading index.
Seven of the 10 economic indicators that make up the 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 goods, and the money supply adjusted for inflation.
The index of coincident indicators, a gauge of current economic activity, rose 0.1 percent to 106.8, after being unchanged the prior month. The gauge reached a high of 107.3 in October.
Recession Arbiter
The index tracks payrolls, incomes, sales and production, which are the figures used by the National Bureau of Economic Research to determine whether a recession has begun.
The gauge of lagging indicators rose 0.4 percent following no change the prior month. The index measures business lending, length of unemployment, service prices and ratios of labor costs, inventories and consumer credit.
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.
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