updated 2/17/2005 10:56:07 AM ET 2005-02-17T15:56:07

A closely watched gauge of future U.S. economic activity slipped 0.3 percent in January, slightly more than expected, indicating possible weakness in the economy in coming months.

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The Conference Board, a private research group, said Thursday that its Index of Leading Economic Indicators declined to 115.6 last month after rising a revised 0.3 percent to 115.9 in December and 0.3 percent to 115.5 in November. Before the November and December increases, the index had been down for five consecutive months, though the declines were modest.

Analysts had expected a drop of 0.2 percent in January.

The index is designed to predict economic activity over the next three to six months.

Ken Goldstein, a Conference Board economist, said in a statement accompanying the report that the economic picture “is positive, but more spotty than robust.”

He added: “The spike in energy prices and the lower dollar took some steam out of the economy. But the larger concern remains cautious attitudes. Business concerns about the direction of cash flow could lead to cautious decisions about hiring and rebuilding inventories.”

In Washington, meanwhile, the Labor Department reported that the number of laid-off workers filing new claims for unemployment benefits fell for a third straight week, dropping to the lowest level in more than four years.

A total of 302,000 Americans filed applications for jobless benefits last week, down 2,000 from the previous week on a seasonally adjusted basis, the department said. The level was the lowest since Oct. 28, 2000, in the closing months of the country’s record 10-year long economic expansion.

The decline in jobless claims caught analysts by surprise. They had been forecasting an increase of around 12,000.

In a second report, the Labor Department said that prices for imported goods rose 0.9 percent in January as foreign petroleum prices jumped 4.6 percent and the price of non-petroleum imports edged up 0.2 percent. Import prices are expected to continue rising this year as the weaker dollar makes foreign products more expensive for American consumers.

Scott Anderson, senior economist at Wells Fargo & Co., which is based in San Francisco, said that the index of leading indicators was being brought down, in part, by the narrow spread between long-and short-term rates, which in the past has signaled an economic slowdown.

He noted, however, that the Fed’s Greenspan said Wednesday that he believes the flattening yield curve may be more a reflection of lower long-term inflation expectations, which is a plus for the economy.

“That means there’s the possibility some false signals from that (yield curve) measure are passing through the economic indicators” and depressing the numbers, Anderson said.

He said that Wells recently raised its projection for first-quarter economic growth to an annual rate of 4 percent, up from an earlier estimate of 3.6 percent, because of strong retail sales and good performance in the housing industry.

The Conference Board said that five of the 10 indicators that make up the leading index contributed to January’s decline — vendor performance, consumer expectations, stock prices, the interest-rate spread, and manufacturers’ new orders for consumer goods and materials. Four were up — average weekly manufacturing hours, the money supply, building permits, and new orders for nondefense capital goods. Claims for unemployment insurance were unchanged.

The coincident index, which reflects current economic activity, was unchanged at 119.6 in January after rising 1.1 percent in December.

The lagging index was up 0.3 percent to 98.6 in January after a drop of 0.7 percent in December.

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