Finance and Economic

The U.S. economy was heading for a deeper slowdown than forecast even before this month’s collapse in financial markets, a gauge of its future performance showed.

The Conference Board’s index of leading indicators, which points to the direction of the economy over the next three to six months, fell 0.5 percent. Separately, the Labor Department reported that more Americans than forecast filed first-time claims for unemployment insurance last week because of the impact of Hurricane Gustav in Louisiana.

The August leading indicators figure was propped up by gains in the stock market that have since evaporated after the failure of Lehman Brothers Holdings Inc. and takeover of American International Group Inc. this week.

"The Wall Street crunch has definitely rolled over into Main Street," said Lindsey Piegza, a market analyst at FTN Financial, which correctly forecast the decline in leading indicators. "It’s a very dismal picture all around."
The leading-indicator index fell at a 2.1 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 payday advance. The gauge met that requirement in January, when it dropped at a 4.7 percent pace.

The New York-based private research group’s leading index was forecast to decline 0.2 percent, according to the median of 57 economists in a Bloomberg News survey.

The Labor Department reported initial jobless claims last week rose 10,000 to 455,000, led by a jump in Louisiana reflecting job losses in the wake of Hurricane Gustav. While the Labor Department said claims would have fallen excluding the state, the overall trend in applications still points to deterioration in the labor market, economists said.

Economists surveyed by Bloomberg in the first week of September anticipated the longest expansion in consumer spending on record will come to an end this quarter. Purchases probably will stall, according to the survey median, the weakest reading since the last three months of 1991.

The economy has lost 605,000 jobs so far this year, and the jobless rate reached a five-year high of 6.1 percent last month.

Source