A lengthy string of increases in the government's main economic forecasting gauge was broken by a 0.1 percent decline in September as economists warned that Wall Street's troubles will lead to even sharper drops in the months ahead.
The Commerce Department reported yesterday that its index of leading indicators, after posting seven consecutive gains, fell for the first time since January.
Strength in several components of the index was offset by a big drop in manufacturing hours and a fall in stock prices.
Because the figures do not reflect the record plunge in stock prices that took place the past two weeks, many analysts predicted that the index would fall by a much larger amount for October. Some economists said the collapse could lead to a negative figure in November as well, especially if the turmoil spreads to other parts of the economy.
Economists said they believed that the index was signaling slower growth for next year, with the chance of a recession an increasing possibility. In the past, three consecutive declines in the index has often, but not always, signaled an impending downturn.
"If we get three consecutive declines and the stock market is near the lows it reached, then that will be a clear signal of a recession," said Allen Sinai, chief economist of Shearson Lehman Bros. "But if the stock market bounces back, then three consecutive declines may only be signaling a major slowdown for the economy."
In other economic news yesterday, the government reported that sales of new single-family houses fell by 5.2 percent in September to an annual rate of 656,000 units. It was the largest decline since May and reflected the adverse impact of an increase in mortgage rates during the month, analysts said.
Many economists predicted that housing would show little improvement for the rest of the year because potential buyers will be scared off by the stock market decline.