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Group predicts more economic weakness

A gauge of future economic activity dropped for the fourth consecutive month in January, a business group said Thursday, suggesting the U.S. economy could weaken further in the near future.
/ Source: The Associated Press

A gauge of future economic activity dropped for the fourth consecutive month in January, a business group said Thursday, suggesting the U.S. economy could weaken further in the near future.

The Conference Board said its index of leading economic indicators fell 0.1 percent last month, after a revised 0.1 percent drop in December and a 0.4 decline in November.

The index is designed to forecast the direction of the nation’s economy over the next three to six months. Persistent, pronounced declines over several months could signal a recession is in store.

With the decline, the leading index has fallen 2.0 percent over the last six months, the biggest drop since early 2001. Weakness among the components that make up the index has also been more widespread in recent months.

“What we’re seeing is that it’s very, very close to capitulation,” said Brian Bethune, an economist with Global Insight.

The Conference Board report comes a day after the Federal Reserve released its updated forecast for slower economic growth, higher unemployment and higher inflation. The dismal outlook for the year was despite the central bank’s aggressive interest rate cuts in January.

Also Thursday, the Labor Department said the number of newly laid off workers filing claims for unemployment benefits fell last week, but the larger-than-expected drop was seen as only a temporary improvement. Analysts noted claims offices in California were closed for a day last week for a state holiday, giving laid off workers one less day to file claims.

The four-week average for claims, which gives a better picture of labor market trends, rose to 360,500, which was the highest level since claims spiked in October 2005.