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The index of U.S. leading economic indicators probably fell in August for a third month, signaling the growth outlook darkened even before the latest collapse in financial markets, economists said before reports today.

The Conference Board's gauge, a measure of the economy's direction over the next three to six months, fell 0.2 percent, according to the median forecast in a Bloomberg News survey. Another report may show manufacturing in the Philadelphia region contracted in September for a 10th month.

The three-year housing slump that triggered the credit- market crisis, a loss of jobs and slowdown in spending may bring an end to the economic expansion. Plunging stock markets this month following the collapse of Lehman Brothers Holdings Inc. and federal takeover of American International Group Inc. reflect a breach of confidence that is likely to deepen the downturn.

“Odds are high that the economy will post a negative quarter or two through the first half of next year,'' said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania. “The financial system is in turmoil.''

The leading index is due at 10 a.m. from the New York-based research group. Estimates in the survey of 57 economists ranged from a drop of 0.6 percent to a gain of 0.2 percent. The measure fell 0.7 percent in July.

Also at 10 a.m., the Federal Reserve Bank of Philadelphia's factory gauge is projected to come in at minus 10, following a reading of minus 12.7 in August. Negative numbers signal contraction. Forecasts ranged from minus 15 to minus 5. The measure averaged 5.1 last year.

Jobless Claims

A Labor Department report at 8:30 a.m. may show initial jobless claims were little changed last week at a level that indicates the labor market is deteriorating. First-time applications for unemployment benefits decreased by 5,000 to 440,000, according to a Bloomberg survey median.

Seven of the 10 components of the leading index are known ahead of time: jobless claims, stock prices, building permits, consumer expectations, the yield curve, supplier delivery times and factory hours paydayloans.

The Conference Board estimates the remaining three — new orders for consumer goods, bookings for capital equipment and the money supply adjusted for inflation.

Economists surveyed by Bloomberg in the first week of September anticipated the longest expansion in consumer spending on record will come to an end this quarter. Purchases will probably stall, according to the survey median, the weakest reading since the last three months of 1991.

Housing Slump

The housing slump is deepening, threatening the financial system and leading to this week's government takeover of AIG and Lehman's bankruptcy.

Building permits, a sign of future construction, fell 8.9 percent in August, while work began on the fewest houses in 17 years, the Commerce Department reported yesterday.

In a sign of weakness in manufacturing, the average factory employee worked 40.9 hours a week in August, the fewest in more than a year, the Labor Department reported this month. The economy has lost 605,000 jobs so far this year and the jobless rate reached a five-year high of 6.1 percent in August.

More dismissals may be on the way. Chrysler LLC's Chief Executive Officer Bob Nardelli said the automaker may need to cut more jobs and trim other costs should U.S. lawmakers fail to approve $25 billion in loans to help the industry develop fuel- efficient vehicles.

Nardelli said he hadn't “seen any signs'' of a U.S. economic recovery, during a Sept. 12 interview. “It's critically important that we get this economy re-fired, that we get the energy back into this economy, that we get consumer confidence back in,'' he said.

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