Sept. 22 (Bloomberg) -- The index of leading U.S. economic indicators fell in August for a second straight month as rising gasoline prices sapped consumer confidence even before Hurricane Katrina struck.

The index slid 0.2 percent following a revised 0.1 percent decline in July, the New York-based Conference Board said today. The back-to-back declines were the first since 2001.

Record fuel costs curbed the consumer spending that makes up 70 percent of the world's largest economy, crimping sales at retailers including Best Buy Co. Sentiment is sliding further in the wake of Katrina and with the approach of a second storm, Rita, which threatens to shut down refineries in Texas.

``The gasoline price spike, even pre-Katrina, was affecting confidence,'' said Haseeb Ahmed, U.S. economist at JPMorgan Capital Corp. in New York. ``This new hurricane could bring it down more.''

The number of Americans filing first-time claims for jobless benefits rose to 432,000 last week, the highest in more than two years, after people were thrown out of work by Katrina, the Labor Department said earlier today. Initial jobless claims, a component of the leading index, didn't contribute or detract from the gauge in August.

The leading index, a composite of 10 indicators, is intended to show how the economy is likely to perform over three to six months. Three indicators were negative contributors, two were unchanged and five were positive.

Declines in consumer confidence and building permits were among the biggest contributors to the fall in August. Among the positive contributors were manufacturers' new orders for non- defense capital goods, new orders for consumer goods and stock prices.

Forecasts

The index was forecast to fall 0.3 percent, according to the median of 54 economists surveyed by Bloomberg News. Forecasts ranged from a decline of 0.4 percent to an increase of 0.1 percent.

``The smaller than expected decline in the index is probably not as bad as the headline would suggest because it was mostly concentrated in consumer sentiment, which may likely bounce back if energy prices stabilize,'' said Anthony Chan, senior economist at JPMorgan Asset Management in Columbus, Ohio, who correctly predicted the size of the drop.

Katrina, which struck on Aug. 29 sand killed more than 1,000 people, may cost the economy 400,000 jobs and a cut a percentage point from economic growth in the second half of the year, according to the Congressional Budget Office.

The International Monetary Fund yesterday shaved its forecast for U.S. growth this year, predicting lower consumer spending because of Katrina. The economy will expand 3.5 percent, compared with an April estimate of 3.6 percent, the Washington-based lender predicted.

Hurricane Rita

Federal Reserve policy makers raised their benchmark interest rate a quarter-point to 3.75 percent this week and signaled it may increase borrowing costs again, saying the economy faces only a ``near-term'' setback after the storm.

The decision suggested the Fed is more concerned about the storm's inflationary impact. The Fed statement said high energy costs ``have the potential to add to inflation pressures.''

Rita may add to the nation's economic woes. Prices of crude oil and gasoline jumped today as the storm headed for Texas, disrupting supplies at U.S. rigs and fineries that escaped damage from last month's storm.

Consumer confidence and spending were falling before Katrina struck. Retail sales fell 2.1 percent in August as auto purchases slumped after surging the previous month, the Commerce Department said Sept. 14.

Consumer Confidence

The University of Michigan's gauge of consumer confidence for September showed the biggest plunge since 1980 after Katrina crippled oil refineries, driving energy prices higher.

Best Buy, the largest U.S. electronics retailer, said same- store sales will gain about 4 percent this year, a percentage point less than originally forecast, partly due to rising gasoline prices.

``Our back-to-school season was not as robust as we hoped,'' Brad Anderson, chief executive of Richfield, Minnesota- based Best Buy, said in an interview on Sept. 13.

The Conference Board's index of coincident indicators, a gauge of current economic activity, rose 0.2 percent in August after a 0.1 percent gain the previous month. The index tracks payrolls, incomes, sales and production.

The index of lagging indicators fell 0.1 percent after gaining 0.3 percent in July. The gauge tracks business lending, length of unemployment, services prices and ratios of labor costs, inventories and consumer credit.

The index of leading indicators reached a level of 137.6 in August, compared with 137.9 in July and 135.1 in August 2004. The index has a base value of 100 established in 1996.

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

Last Updated: September 22, 2005 11:05 EDT