Oct. 20 (Bloomberg) -- The index of leading U.S. economic indicators may have fallen in September, the first decrease in six months, signaling slower growth in the months to come, economists said ahead of a private group's report today. The New York-based Conference Board's September gauge of how the economy will perform in the next three to six months may have fallen 0.1 percent, based on the median of 43 forecasts in a Bloomberg News survey of economists. The index, compiled monthly by the private research group, has been pointing to expansion since May, when it rose 1.1 percent. Economists have raised their forecasts for third-quarter growth over the past month as the employment and weekly jobless claims were better than expected. A decline in the leading indicators index for last month, reflecting lower money supply and consumer confidence, may signal expansion at a slower pace this quarter, economists said.
The report ``suggests the economy is very far from recession,'' said Richard Yamarone, an economist at Argus Research Inc. in New York. ``But then again it's not signaling great growth'' either. The Conference Board is to release the leading indicators report at 10 a.m. in New York. Estimates in the Bloomberg News survey ranged from a decline of 0.4 percent to a rise of 0.5 percent. The group assigns weights to each of 10 economic indicators and derives the index by adding or subtracting their changes from month to month. The greatest importance is attached to the difference between the yield on the Treasury's 10-year note and the rate banks charge each other for overnight loans, also known as the yield curve, which can be used as a gauge of the direction of interest rates. The number of orders manufacturers received for new plants and equipment gets the smallest weighting. Seven of the 10 components are known before the report -- initial jobless claims, real money supply, the yield curve, building permits, factory hours, stock prices and deliveries. The Conference Board estimates the remaining three -- new orders for consumer goods, new orders for capital goods and average weekly manufacturing hours.
A decline in money supply last month would be the greatest drag on the index, economists said. Consumers may have withdrawn from savings accounts and put money into the stock market in the first few weeks of the month, economists said. The spread between the yield on the 10-year Treasury note and the Federal Reserve's target rate of 1 percent on overnight loans between banks narrowed to 2.94 percentage points at the end of the month from 3.6 at the beginning, as higher jobless claims pushed down consumer confidence and created concern that economic growth would slow. The number of Americans applying for unemployment benefits exceeded 400,000 in three of the four weeks in September. Some economists consider 400,000 the dividing point between labor market expansion and contraction. Another report that may have dragged down the index was a decline in building permits to a 1.86 million annual pace from 1.901 million the month before. The number of hours worked by factory employees rose in September to 40.4 from 40.2 the month before, a sign that manufacturers were finding it tougher to keep up with rising demand and may have to start hiring. That may have made a positive contribution to the leading indicators index, economists said.
The Standard & Poor's 500 index fell 1.19 percent in September as reports later in the month, including the decrease in consumer confidence, caused concern about the sustainability of the economic expansion. Stronger-than-expected economic reports over the past week, including a decline in the number of jobless claims and a jump in U.S. factory production, are leading some economists to raise their forecasts for third-quarter economic growth. Economists at Lehman Brothers Inc. and Merrill Lynch & Co. Friday boosted their projections of the rate of economic expansion by 1 and 2 percentage points, respectively, to a 6 percent annual pace. Wells Fargo & Co. raised its growth forecast to a 7 percent annual rate from 6.5 percent. The median estimate of 58 economists surveyed by Bloomberg News Sept. 26 to Oct. 3 was for gross domestic product to rise at a 5.1 percent rate from July through September. Growth in the fourth quarter may slow to a 3.8 percent pace, the Bloomberg survey found, as consumer spending loses the boost provided by tax cuts and advance refund checks. //www.bloomberg.com