One of the latest measures of future U.S. economy took a second consecutive drop in July, while the reading on current conditions moved up slightly.

The private research group the Conference Board reported Monday morning its Index of Leading Economic Indicators, which measures where the U.S. economy is headed the next three to six months, fell 0.4% in July, following a 0.2% drop in June and 0.6% in May. The board’s measure of current economic activity rose 0.1 percent in July, while the index that reflects changes that have already occurred increased by the same amount.
Six of the 10 indicators that make up the leading index decreased in July. The negative contributors to the leading index (from the largest negative contributor to the smallest) were stock prices, average weekly manufacturing hours, index of consumer expectations, interest rate spread, vendor performance, and building permits. The four positive contributors to the index (beginning with the largest positive contributor) were money supply, manufacturers’ new orders for non-defense capital goods, average weekly initial claims for unemployment insurance, and manufacturers’ new orders for consumer goods and materials.
Three consecutive declines in the leading indicator is usually seen as a signal of a weakening economy ahead, but that’s not expected to happen, says Newport Communications Senior Economist Jim Haughey.
“An August drop is unlikely because the two sources of the June/July decline have now changed direction," he says. "Stock market indexes are currently more than 10 percent higher than in July, and the sharp drop in consumer expectations appears to have stabilized.”
However, he notes, the two-month fall in the leading indicator confirms that the pace of the recovery has fallen below average during the summer.