MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — A gauge designed to predict the economy’s future health posted the sharpest advance in four months in July, indicating the economy is gaining traction headed into the last half of the year.

The Conference Board said Thursday that its index of leading indicators rose 0.9 percent last month, the sixth straight increase and the best showing since a 1 percent rise in March. The index, composed of 10 forward-pointing indicators, had risen 0.6 percent in June.

Financial market conditions, a big rise in applications for building permits and falling applications for unemployment benefits were the biggest sources of strength in July.

The index was held back by a drop in average weekly hours in manufacturing and weaker orders for civilian capital goods.

“The pace of economic activity remained reasonably strong in July,” said Conference Board economist Ken Goldstein. “Although retail sales were a little disappointing, hiring and industrial activity improved.”

Goldstein said the stronger gain in the leading index in July along with an acceleration in economic growth in the second quarter pointed to solid growth in coming months.

The economy, which shrank in the first quarter, reflecting in part a harsh winter, posted a robust rebound in the April-June period, growing at a seasonally adjusted annual rate of 4 percent.

Many economists are looking for the economic momentum to continue with growth around 3 percent in the current July-September quarter and in the last three months of this year.

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