A gauge of future business activity fell last month to its lowest point in more than two years, indicating the economy's growth could be dragged down further amid rising costs and housing woes, a business research group said Thursday.
The Conference Board said its index of leading indicators dropped 0.4 percent in November to its lowest point since July 2005, after falling 0.5 percent in October and rising by a slight 0.1 percent in September. That indicates that the economy could weaken further this winter and possibly into the spring, since the index projects growth for the coming three to six months.
The index was at 136.3 in November, versus a revised 136.9 in the previous month. In July 2005, the index was at 136.5.
Last month's drop was close to what economists surveyed by Thomson/IFR had predicted, who on average said there would be a drop of 0.5 percent.
The index is watched as an indicator of where the U.S. economy is headed, and persistent weakness can signal a recession in three to six months. Many economist believe the current slowdown could mean a full recession in 2008.
Ten indicators make up the leading index. Seven of them fell: stock prices, average weekly initial claims for unemployment insurance, index of consumer expectations, real money supply, building permits, interest rate spread and manufacturers new orders for consumer goods and materials. Positive contributors were vendor performance, average weekly manufacturing hours and manufacturers' new orders for nondefense capital goods.
The group's coincident index, which measures current economic health, increased by 0.2 percent in November, which follows a 0.1 percent drop in October and a 0.1 percent rise in September.
"The coincident index, which was rock steady through the spring and summer, chugging on, that has started to slow a little bit," said Ken Goldstein, labor economist at the Conference Board.
Goldstein said the decline in the forward-looking leading indicator shows that the economy today, as measured by the coincident index, is not likely to return to the growth levels of earlier this year.