Index signals slowdown will deepen through year

Conference Board figure falls in July

WASHINGTON - The US slowdown will deepen in the second half of the year as housing continues to slump and unemployment rises, according to a measure designed to predict the economy's direction.

The Conference Board's index of leading indicators fell 0.7 percent in July, more than triple the drop forecast by economists surveyed by Bloomberg News. Separate reports yesterday showed the number of Americans collecting unemployment insurance remained near a five-year high last week, and manufacturing in the Philadelphia region shrank for a ninth straight month.

"The economy has really shown one sign after another of weakening," Martin Feldstein, a Harvard University economist, said in Jackson Hole, Wyo., where he's attending an annual Federal Reserve conference. Feldstein said he is "much more pessimistic than a year ago" about the outlook.

Feldstein cited the credit crunch and the turmoil engulfing Fannie Mae and Freddie Mac, which threatens to send up mortgage rates.

The Conference Board's index was forecast to decline 0.2 percent, according to the median of 63 economists in a Bloomberg News survey.

"While we're well along in the credit crunch, we're in the peak of its impact on the economy," former Federal Reserve governor Laurence Meyer, now vice chairman at Macroeconomic Advisers LLC, said at the Fed conference. "We're still on the edge of recession right now," with growth unlikely to move toward its trend until 2009, he said.

Sagging orders and falling sales hurt factories in the Philadelphia region this month, a report from the Fed 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.

"Manufacturing overall still remains in a slump," said Russell Price, a senior economist at H&R Block Financial Advisors Inc. in Detroit. "Demand remains weak enough that it's going to maintain pressure on manufacturing for some time."

For the first time since January 2007, Americans who said the economy will improve in the next six months outnumbered those who said it will get worse, according to results of the latest Bloomberg/Los Angeles Times poll, issued yesterday. Still, about three of every four people surveyed said the United States is on the wrong track.