Data suggest U.S. growth will slow

Strained by a tight credit market, the nation’s economy should stumble along at a slower pace in coming months, but it may find help from lower interest rates and possible employment gains.

The Conference Board said Thursday that its index of leading economic indicators dropped 0.6% in August, slightly more than the 0.5% decrease analysts were expecting. The decline follows a revised 0.7% rise in July.

Although the index has jumped up and down in recent months, the cumulative change over the last six months has been a 0.5% rise.

That’s consistent with the modest growth of the nation’s gross domestic product, which grew at about a 2% pace in the second quarter, analysts said.

Also Thursday, the Labor Department said jobless claims declined to the lowest level in seven weeks, surprising analysts who were expecting an increase in claims.

“That shows there’s firm demand for labor despite the turmoil in the marketplace,” said Gary Bigg, an associate economist at Bank of America. “That’s good news.”

Taken together, Bigg said the data indicated that the economy would continue its slow but steady growth.

The Conference Board report, taken before the Fed’s rate cut this week, may simply reflect the immediate effects of the clampdown in credit markets in August, analysts said.

The report tracks 10 economic indicators. Only one of those indicators, real money supply, advanced in August.

The negative components, starting with the largest, were consumer expectations, unemployment claims, stock prices, building permits, vendor performance, manufacturers’ new orders for nondefense capital goods, interest rate spread and manufacturers’ new orders for consumer goods.

Weekly manufacturing hours held steady.

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

The index rose a revised 0.7% in July after slipping 0.1% in June. The erratic pattern reflects the uncertainty over the effect of the credit crisis on the overall economy.

“Economic growth is likely to continue in the near term, although at a slower pace,” said Ken Goldstein, labor economist for the Conference Board.

For growth to continue, however, Goldstein said there would be potential hurdles to overcome.

“This loss of household assets, if combined with weak employment growth, could have a negative impact on consumer spending going forward,” Goldstein said.