Leading economic index posts third monthly drop

WASHINGTON (Reuters) - A closely watched index of future economic activity dropped for a third straight month in December, implying growth will remain sluggish and faces rising risks of weakening, the Conference Board said on Friday.

The business research group said its Index of Leading Economic Indicators fell 0.2 percent in December after drops of 0.4 percent in November and 0.7 percent in October.

Wall Street economists surveyed by Reuters had expected a slightly smaller 0.1 percent decline in December.

"Consumption and investment have weakened and even export growth, the remaining source of strength, has cooled," said Ken Goldstein, an economist at the Conference Board. "The latest data suggest that growth could remain slow, and possibly be even a little slower, in the first half of 2008."

The leading index is a composite of several gauges of economic activity. Six out of the 10 measures were negative in December, with falling housing permits the biggest drag on the index.

The U.S. housing sector is in steep decline with construction, sales and permits all falling.

The other five gauges that declined in December were weekly manufacturing hours, new orders for nondefense capital goods, weekly claims for unemployment benefits, consumer expectations and interest-rate spreads.

Positive contributions to the index came from improved vendor performance, a higher money supply, increased stock prices and higher consumer goods orders.

(Reporting by Glenn Somerville; Editing by Tom Hals)