April 20 (Bloomberg) -- The index of U.S. leading indicators for March may show the longest recession in the post- World War II era will start loosening its grip in coming months, economists said before a report today.

The gauge of the outlook over the next three to six months dropped 0.2 percent following a 0.4 percent February decrease, according to the median estimate of 40 economists surveyed by Bloomberg News.

The report will support Federal Reserve Chairman Ben S. Bernanke’s view that the economy is taking a potential “first step” to recovery. The billions of dollars being pumped into financial markets by the central bank are helping to lower borrowing costs, while the Obama administration’s stimulus programs may boost spending.

“There are signs that the downturn is starting to abate in certain sectors,” said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc. in New York. “We’ll start to see smaller minus signs” in economic growth.

The New York-based Conference Board’s index is due at 10 a.m. Washington time. Estimates in the survey ranged from a drop of 0.7 percent to a 0.1 percent gain.

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.

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

More Money

Increased lending and purchases of securities by the Fed since credit markets seized last year have contributed to a jump in the money supply, the biggest component of the leading index.

Still, Bernanke last week said the credit crisis will probably cause “long-lasting” damage to home prices and household wealth.

Economists surveyed by Bloomberg in the first week of April forecast consumer spending will falter this quarter after a first-quarter spurt and recover only gradually toward the end of the year. Purchases will drop at a 0.5 percent pace from April to June and grow at an average 0.9 percent rate the next six months, economists forecast.

Gross domestic product will probably decline at a 2 percent pace in the second quarter after an estimated 5 percent drop in the first three months of the year, according to the survey. Growth will pick up to an average pace of almost 1 percent in the second half, the surveyed showed.

Job Losses

The recession that began in December 2007 already matches the longest since 1933, and the 6.3 percent decline in fourth- quarter GDP was the biggest since 1982. The downturn has cost 5.1 million jobs and economists surveyed by Bloomberg forecast the unemployment rate will rise to 9.5 percent by the end of the year.

While residential construction shows signs of stabilizing near a record low, a rebound isn’t likely, economists said. Building permits, a sign of future construction, fell 9 percent in March, while work on single-family homes remained little changed for a third month, the Commerce Department reported last week.

Also contributing to the decline in the leading index last month were a drop in the factory workweek, an increase in claims for jobless benefits and lower stock prices.

Stocks have rallied 29 percent since reaching a 12-year low on March 9. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon helped spark the gain when he said the second-largest U.S. bank by assets was profitable in the first two months of 2009.

JPMorgan last week reported profit that beat analysts’ estimates, even as it boosted reserves for credit losses.

Dimon said on an April 17 conference call with reporters that he expects “some continued deterioration” in the economy.

                        Bloomberg Survey

====================================
                               LEI

                              MOM%
====================================

Date of Release              04/20
Observation Period           March
------------------------------------
Median                       -0.2%
Average                      -0.2%
High Forecast                 0.1%
Low Forecast                 -0.7%
Number of Participants          40
Previous                     -0.4%
------------------------------------
4CAST Ltd.                   -0.3%
Action Economics             -0.3%
Aletti Gestielle SGR         -0.2%
Argus Research Corp.         -0.2%
Bank of Tokyo- Mitsubishi    -0.4%
BBVA                         -0.4%
BMO Capital Markets           0.0%
BNP Paribas                   0.0%
Commerzbank AG               -0.2%
Credit Suisse                -0.3%
Daiwa Securities America     -0.2%
DekaBank                     -0.1%
Desjardins Group             -0.5%
Deutsche Bank Securities     -0.1%
Deutsche Postbank AG         -0.3%
First Trust Advisors         -0.5%
Helaba                       -0.2%
Herrmann Forecasting         -0.3%
HSBC Markets                  0.0%
IDEAglobal                   -0.2%
IHS Global Insight           -0.3%
Informa Global Markets        0.0%
ING Financial Markets        -0.2%
Insight Economics            -0.2%
Janney Montgomery Scott L    -0.1%
Landesbank Berlin            -0.7%
Landesbank BW                -0.1%
Maria Fiorini Ramirez Inc    -0.3%
Merrill Lynch                -0.5%
Moody’s Economy.com           0.1%
Morgan Stanley & Co.         -0.3%
Nomura Securities Intl.      -0.5%
RBS Securities Inc.          -0.3%
Stone & McCarthy Research    -0.4%
TD Securities                -0.2%
Thomson Reuters/IFR          -0.2%
Unicredit MIB                -0.1%
University of Maryland       -0.3%
Wachovia Corp.               -0.2%
WestLB AG                    -0.1%
====================================

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

Last Updated: April 20, 2009 00:01 EDT