By Rex Nutting, CBS.MarketWatch.com
July 22, 2004

WASHINGTON (CBS.MW) -- The nation's economic momentum slowed in June, the Conference Board said Thursday.

The index of leading economic indicators fell 0.2 percent last month, marking the first decline since March 2003, the board said. Five of the 10 leading indicators declined, led by, in order, building permits, the factory workweek, supplier's deliveries, money supply and interest rates.

The five indicators that improved in June were consumer expectations, stock prices, jobless claims, capital-goods orders and consumer-goods orders. Read the full report.

Economists surveyed by CBS MarketWatch had been expecting, on average, the index to rise 0.1 percent. See Economic Calendar.

May's index was revised lower, to an increase 0.4 percent from 0.5 percent.

The June data reflect "a strong economic environment, but one with less momentum than last month," said Ken Goldstein, economist at the Conference Board, a New York-based researcher. Some of the decline was likely due to businesses closing for the funeral of former President Reagan during the payroll survey week, he said.

Still, Goldstein said housing activity slowed in June, and retail sales were weak.

By contrast, "income growth is relatively stable and investment in equipment is now the hottest sector in the U.S. economy," he said.

The coincident index increased 0.1 percent in June, while the lagging index was unchanged.

The indexes are designed to forecast changes in the business cycle. Recessions are signaled by a sustained and widespread decline in the leading index, not just a one-month downturn.

"There is certainly no signal here that the economy is about to tank," said Joshua Shapiro, chief economist for MFR.

The leading index is up 1.5 percent over the past six months, while eight of the 10 indicators have improved in that interval.

In June, data show that employment, retail sales, industrial production and housing construction all softened from earlier robust levels.

Federal Reserve Chairman Alan Greenspan said earlier this week that he believed the June slowdown was merely a temporary soft patch for the economy that would prove short-lived.

Indeed, the Fed is forecasting stronger economic growth in the second half of the year than in the first.

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