Expectations for the economy improved in July, boosted by fewer jobless claims and brighter consumer sentiment, The Conference Board reported today.

The U.S. leading index, a key barometer of future economic conditions, rose 0.4 percent last month to 138.1, with six of 10 indicators advancing. Based on revised data, the leading index has now increased in three of the last six months.

In July, consumer expectations, vendor performance and initial claims for unemployment insurance made large positive contributions to the leading index, offsetting the negative contributions of housing permits, manufacturers’ new orders for nondefense capital goods, and interest-rate spread. The leading index increased 0.1 percent from January to July (a 0.3 percent annual rate)

Following a brief pick up at the end of 2006, the leading index has been essentially flat in the first half of 2007 and the strengths and weaknesses among the leading indicators have been balanced over this period. At the same time, in the first half of the year real GDP growth slowed down to about a 2 percent average annual rate (including a 0.6 percent rate in the first quarter and a 3.4 percent rate in the second quarter), following a 2.6 percent average rate in the second half of 2006. The performance of the leading index so far in the first half of 2007 continues to suggest that the economy is likely to grow in the near term, albeit at a slow pace, according to The Conference Board.

The coincident index, a gauge of the current state of the economy, increased again in July and is 1.1 percent above its January level (a 2.1 percent annual rate), The Conference Board reported. The largest positive contributions to the gain in the coincident index have come from industrial production and employment in recent months. The strengths among the coincident indicators have been very widespread in recent months despite the slower growth in the index this year, down from its growth rate of about a 2.5 percent average annual rate in 2006.

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