By Bob Willis July 20 (Bloomberg) -- The index of U.S. leading indicators probably rose in June for a third consecutive month, another sign the economy may be emerging from the worst recession in five decades, economists said before a report today. The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.5 percent, according to the median forecast in a Bloomberg survey of 46 economists. It would be the first time the index has climbed for three months in a row since 2004. Smaller job losses, rising stock prices and stabilization in homebuilding and manufacturing are evidence that government efforts to stem the financial crisis and lower borrowing costs may pay off. A jobless rate that is forecast to reach 10 percent and falling home values are a reminder that any expansion will be muted as consumers rein in spending and boost savings. “The recession is winding down but the strength of the recovery remains in question,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “The weak labor market is a hurdle.” The New York-based Conference Board’s index is due at 10 a.m. Survey estimates ranged from a 0.3 percent drop to a gain of 1 percent. A widening spread between the 10-year Treasury note, where yields rose based on mounting speculation of an economic recovery, and the overnight fed funds rate will be one of the biggest reasons behind the projected gain in the leading index, according to Michael Englund, chief U.S. economist at Action Economic LLC in Boulder, Colorado. Stocks Rise A 2.6 percent gain in the average level of the Standard & Poor’s 500 Stock Index in June from the prior month also contributed. The stock index has soared about 39 percent since March 9 -- when it reached its lowest level in more than 12 years -- as data signaled the worst of the downturn has passed. Stocks have continued to rise this month, with the S & P 500 adding another 2.3 percent since the end of June, on stronger-than-expected bank earnings and more signs the economy is stabilizing. The leading index probably got more support from a decline in average weekly initial jobless claims in June to 616,000 from 627,000 in May, as firings slowed. Increases in home construction will also contribute. Building permits rose 8.7 percent in June from the prior month, the biggest gain in a year, the Commerce Department said last week. Brighter Outlook Economists surveyed by Bloomberg from July 2 to July 8 projected the U.S. economy will grow at an average 1.5 percent pace in the second half of the year after falling at an estimated 1.8 percent rate in the second quarter. They also said the jobless rate will surpass 10 percent by early 2010. Seven of the 10 indicators for the leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, factory hours and supplier delivery times. The Conference Board estimates new orders for consumer goods, bookings for capital goods, and the money supply adjusted for inflation. Bloomberg News ====================================== LEI MOM% ====================================== Date of Release 07/20 Observation Period June -------------------------------------- Median 0.5% Average 0.5% High Forecast 1.0% Low Forecast -0.3% Number of Participants 46 Previous 1.2% -------------------------------------- Action Economics 0.5% AIG Investments 0.5% Aletti Gestielle SGR 0.8% Ameriprise Financial Inc 0.4% Argus Research Corp. 0.7% Bank of Tokyo- Mitsubishi 0.2% Bantleon Bank AG 0.6% Barclays Capital 0.5% BBVA 0.8% BMO Capital Markets 0.4% BNP Paribas 0.5% Capital Economics 0.5% Commerzbank AG 0.3% Credit Suisse 0.6% DekaBank 0.5% Desjardins Group 1.0% Deutsche Bank Securities 0.5% Deutsche Postbank AG 0.3% DZ Bank 0.4% First Trust Advisors 0.9% FTN Financial 0.6% Helaba 0.5% HSBC Markets 0.8% IDEAglobal 0.4% IHS Global Insight 0.9% Informa Global Markets 0.4% ING Financial Markets 0.5% Insight Economics 0.8% Johnson Illington Advisor 0.6% Landesbank Berlin 0.3% Maria Fiorini Ramirez Inc 0.5% Merrill Lynch 0.2% Moody’s Economy.com 0.8% Morgan Keegan & Co. 0.8% Morgan Stanley & Co. 0.5% Nomura Securities Intl. 0.5% PNC Bank -0.3% Ried, Thunberg & Co. 0.7% Schneider Foreign Exchang 0.0% Stone & McCarthy Research 0.5% TD Securities 0.5% UniCredit Research 0.8% Wells Fargo & Co. 0.8% WestLB AG 0.5% Westpac Banking Co. 0.4% Woodley Park Research 0.8% ===================================== To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net

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