Leading Indicators Set Stage for More Growth : Economy: Index rises for third consecutive month, but construction spending continues its decline.

A major U.S. economic forecasting gauge rose for the third straight month to indicate the economy will continue growing into next year, but spending on construction fell in July for the fourth consecutive month.

The Conference Board said Wednesday that the widely watched index of leading economic indicators, a measure of future economic activity, rose 0.3% in July after gaining 0.3% in both June and May.

A report by the Commerce Department, however, showed that construction spending fell 0.5% in July to a seasonally adjusted annual rate of $695.7 billion after a revised 0.1% drop in June to $699.1 billion.

The three indicators published by the Conference Board, each of which attempts to predict the U.S. economy’s future and measures its current and past performances, saw gains in July.

“Taken together, the three composite indexes and their components show a healthy economy,” the Conference Board said. “The leading indicators point to continuation of the expansion through early 2000.”

The U.S. economy, now in its second-longest expansion ever, is poised to break the record set in the 1960s of 106 months of growth if the upturn lasts past early 2000.

July’s gain in the leading indicators matched the 0.3% rise expected by Wall Street economists.

“The two key drivers of this latest increase were manufacturing and the labor market,” said Ken Goldstein, a Conference Board economist. “But there are concerns that the two interest rate hikes this summer could slow growth later this year.”

On Aug. 24, the Federal Reserve raised two key interest rates by a quarter-point each, the second increase in two months.

Changes in the leading indicators index are intended to predict turning points in the business cycle, such as a pickup in growth or a recession.

Seven of the 10 factors of the July leading index were positive, led by capital goods orders, the average workweek and stock prices. The Treasury yield curve and consumer expectations were negative. There was no change in building permits.

The Commerce Department’s construction spending data for July mark the longest period of consecutive declines in more than eight years. But some economists said the figure is at odds with anecdotal evidence from the industry.

“These figures are very hard to square with the virtually booming . . . construction activity one sees in most regions recently,” First Union bank said.

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Index of Leading Economic Indicators

Seasonally adjusted Index: 1992-100

July: 108.0

Source: Conference Board

Construction Spending

In billions of dollars seasonally adjusted:

July: $695.7 billion

Source: Commerce Department