Indicator Index Declines 0.1%

The index of leading economic indicators unexpectedly dropped in July, a research group reported Thursday, yet another sign that economic growth will continue to slow.

The 0.1% decline followed a 0.1% gain in June, the New York-based Conference Board said. The index has dropped at a 1.4% annual rate in the last six months, the worst performance since February 2001.

Five of the 10 components of the index contributed to the drop. The measure gives guidance on the direction of the economy for the next three to six months.

The report was the third in three days to reinforce Federal Reserve Chairman Ben S. Bernanke’s prediction that the expansion was cooling, leading investors to speculate that the Fed is done raising interest rates for now.

“The LEI continues to give the distinct signal that the economy is moderating,” said Anthony Chan, chief economist with JPMorgan Private Client Services in New York, who once worked at the Fed. “It certainly provides greater comfort for policymakers who opted to pause.”

In another report, the Labor Department said Thursday that the number of workers filing first-time applications for unemployment benefits fell 10,000 to 312,000 last week. The figures suggest employers are holding on to the workers they have, even as growth weakens.

Regional factory surveys show manufacturing is expanding unevenly around the country. The Philadelphia Fed said Thursday that manufacturing in the mid-Atlantic area grew at the fastest pace in more than a year this month.

A similar report from the New York Fed released Tuesday showed factories there expanded at the slowest rate since June 2005. In July, U.S. industrial production grew at half the pace of the previous month, the Fed said Wednesday.

Also affirming the projected direction of the economy, the Congressional Budget Office said Thursday that it expected U.S. growth to slow over the next year and a half to a “moderate, sustainable pace.”

The budget office, in its biannual report, said growth would be an annualized 3% in the second half of this year “and then remain steady at that rate through 2007.”

Economists had expected the index of leading indicators to rise 0.1%, the median of 43 forecasts in a Bloomberg News survey.