Declines in stock prices and housing permits continued to impact the economic outlook in January, as The Conference Board reported today that its U.S. leading index fell for the fourth straight month.

The index, considered a gauge of economic activity over the next three to six months, dipped 0.1 percent in January, and now stands at 135.8. Based on revised data, this index sank 0.1 percent in December, 0.4 percent in November and 0.5 percent in October.

Stock prices were the largest negative contributor to the index in January, followed by housing permits and manufacturers’ new orders for nondefense capital goods, all of which overshadowed positive gains in consumer expectations and jobless claims.

With January’s decline, the leading index has fallen 2 percent (a decline of 4 percent annual rate) from July 2007 to January 2008, the largest six-month decline in the index since early 2001. In addition, the weaknesses among its components have been more widespread than the strengths in recent months.

At the same time, growth in real GDP, which measures the total value of goods and services produced by the United States in a given period, decreased to 0.6 percent in the fourth quarter of 2007, down from an average of about a 2.2 percent annual rate in the first half of 2007 and a 4.9 percent annual rate in the third quarter. Taken together, the current behavior of the composite indexes suggests increasing risks for further economic weakness, and that sluggish economic growth will likely continue in the near term.

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