Index suggests U.S. economic expansion

BY

A closely-watched gauge of future economic activity edged up in July, reversing the previous
month s decline. The recent erratic pattern reflects uncertainty in a U.S. economy roiled by a
credit crunch.

The Conference Board said Monday its index of leading economic indicators rose 0.4 percent in
July, as analysts were expecting. The index fell 0.3 percent in June, after rising 0.2 percent in
May.

The report is designed for forecast economic activity over the next three to six months.

The index has bounced up and down over the past few months, with offsetting gains and
drops suggesting that economic growth is likely to continue, but likely at a slower pace. With
the latest report, the cumulative change in the index over the past six months has increased 0.1 percent.

The movement of the index over the past few months mirrors the volatility of the financial markets.

While July s pickup is in line with the 3.4 percent growth of U.S. economic output in the spring, the main drivers for the latest index -- consumer confidence and jobless claims -- may be
temporary and dip in August, Smith said.

The recent crisis in the financial markets "has yet to manifest itself in the data," .

Monday s upbeat report follows the Federal Reserve s decision Friday to cut its key discount rate by a half-percentage point, a dramatic move meant to stabilize financial markets pummeled by a rapidly spreading credit crisis.

In a statement explaining the action, the central bank said that while incoming data suggest the economy is continuing to expand at a moderate pace, "the downside risks to growth have
increased appreciably."

The Fed said it was "monitoring the situation and is prepared to act as needed to mitigate the
adverse effects on the economy arising from the disruptions in financial markets."

The credit crunch started with rising defaults in subprime mortgages -- home loans made to people with weak credit histories. Analysts believe these problems, along with declining consumer
confidence, could lead to a recession.

Overall U.S. economic output, as measured by the gross domestic product, jumped in the spring to an annual rate of 3.4 percent, the fastest pace in more than a year and up sharply from 0.6 percent growth in the first three months of the year.

The market fell by midday Monday after the July leading indicator report 's release, with the Dow Jones industrials falling 58.04 to 13,021.04.

Broader indexes also fell. The Standard & Poor s 500 index fell 10.74 to 1,435.20; the Nasdaq
composite index fell 11.64 to 2,493.39.

The Conference Board report tracks 10 economic indicators. The advancing components in July were consumer expectations, vendor performance, unemployment claims, real money supply,
stock prices and manufacturers orders for consumer goods and materials.

The negative contributors housing permits, manufacturers new orders for non-defense capital
goods and interest rate spread. Weekly manufacturing hours held steady.

While Monday s report bodes well for short-term economic expansion, the current credit crunch makes 2008 more uncertain.

The fluctuating index "reflects the yo-yo situation in terms of the overall economy," .

JKL

thanks

Amigo

Thanks

BC1410

Thanks!