Conference Board's index of U.S. leading economic indicators rose 0.2% in September, signaling only modest economic growth in the coming months

Cindy Allen

WASHINGTON , October 20, 2011 (Associated Press) – A gauge of future economic activity edged up at a slower pace in September, signaling only modest economic growth in coming months.

The Conference Board reported Thursday that its index of leading economic indicators rose 0.2 percent in September. It was the fifth consecutive gain but was weaker than increases of 0.3 percent in August and 0.6 percent in July.

The increase reflected that five of the 10 indicators that make up the index showed gains in September.

Economists predict an annual growth rate of roughly 2 percent in the second half of this year. While that would be an improvement from the first half of the year, it's not strong enough to significantly lower the unemployment rate, which has been near 9 percent for more than two years.

Ken Goldstein, an economist at the Conference Board, said that the September reading on the leading index pointed to soft economic conditions remaining in place through the end of this year.

"There is a risk that already low confidence — consumer, business and investor — could weaken further, putting downward pressure on demand and tipping the economy into a recession," Goldstein said.

He said the probability of a recession starting over the next few months remained at a very high 50 percent.

The economy grew at a rate of just 0.9 percent in the first six months of the year. Consumers pulled back on spending in the face of high food and gas prices, and supply disruptions caused by Japan's natural disasters slowed U.S. manufacturing.

However, there have been recent indications the economy has improved slightly.

Applications for unemployment benefits have fallen to a six-month low, according to a four-week average calculated by the government. In September, employers added 103,000 net jobs, and consumers increased their spending on retail goods by the most in seven months.

Production at auto plants is up and gas prices are down from their May peak.

For September, the Conference Board said that the biggest positive contribution to the index came from the difference in short-term and long-term interest rates. Other positive factors were the growth in the money supply, supplier delivery times, the index of consumer expectations and new orders for consumer goods and materials.

The biggest negative factor for the index in September was weakness in applications for building permits followed by new orders for nondefense capital gods, stock prices and weekly claims for unemployment benefits.

The tenth component of the index — average weekly hours worked in manufacturing — was unchanged in September.

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