Jan. 18 (Bloomberg) -- The index of U.S. leading economic indicators fell for a third month in December, highlighting the risk of recession, economists said before a report today.

The Conference Board's gauge, which points to the direction of the economy over the next three to six months, fell 0.1 percent last month, according to the median forecast in a Bloomberg News survey of 62 economists.

The collapse in home construction, less hiring and growing pessimism among consumers may spell the end of the expansion that started in 2001. Federal Reserve policy makers, including Chairman Ben S. Bernanke, have signaled they will lower interest rates this month and the Bush administration is working on a stimulus plan to forestall a downturn.

``We really are on the razor's edge,'' said Mike Schenk, a senior economist at the Credit Union National Association in Minneapolis, Minnesota. ``We could very easily be pushed into recession.''

The projected drop would follow a 0.4 percent decrease in November. Economists' forecasts ranged from a decline of 0.3 percent to a gain of 0.1 percent. The New York-based Conference Board's report is due at 10 a.m.

Another report out at the same time is likely to show Americans are growing increasingly pessimistic. The Reuters/University of Michigan preliminary reading of consumer sentiment for January dropped to a two-year low of 74.5, according to the survey median.

Sanguine Outlook

Most economists remain sanguine on the outlook. The world's largest economy is projected to grow at a 1.1 percent annual rate this quarter and pick up speed in the following three months, skirting recession, according to the median forecast of economists surveyed earlier this month.

Economists at Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley are among those in the minority predicting the U.S. is already in, or will soon tip into, recession.

Bernanke, who last week said downside risks to growth were becoming more pronounced, told Congress yesterday a ``temporary'' fiscal stimulus plan may be needed to help the central bank keep the economy from contracting.

The leading indicators index has yet to confirm a downturn has arrived. The gauge through November was down at an annual pace of 2.3 percent over the prior six months, short of the approximate 4 percent to 4.5 percent drop Conference Board economists say signals recession.

Components Down

Declines in the factory workweek, building permits and consumer expectations for the next six months, along with rising jobless claims, contributed to the projected drop in the December leading index, economists said.

The Standard and Poor's 500, one of the components of the leading index that improved last month, has now taken a turn for the worse. The S&P average is down 5.1 percent so far this month from December's average.

Consumer spending, which accounts for more than two-thirds of the economy, started to cool last quarter, making the holiday shopping season the weakest in five years.

Kohl's Corp., AnnTaylor Stores Corp. and J.C. Penney Co. cut profit forecasts Jan. 10 after reporting declines in December sales at stores open at least a year. Luxury jeweler Tiffany & Co. said last week the slump may continue into January.

Seven of the 10 components of the leading economic indicators index are known before the report: initial jobless claims, consumer expectations, building permits, supplier deliveries, the yield curve, stock prices and factory hours.

The Conference Board estimates money supply adjusted for inflation, new orders for consumer goods and orders for non- defense capital goods.

                        Bloomberg Survey

============================================
                         U of Mich      LEI
                             Conf.
                             Index     MOM%
============================================

Date of Release              01/18    01/18
Observation Period          Jan. F     Dec.
--------------------------------------------
Median                        74.5    -0.1%
Average                       74.5    -0.1%
High Forecast                 78.0     0.1%
Low Forecast                  70.0    -0.3%
Number of Participants          64       62
Previous                      75.5    -0.4%
--------------------------------------------
4CAST Ltd.                    74.5    -0.1%
Action Economics              74.0     0.0%
AIG Investments               75.5     0.1%
Aletti Gestielle SGR          73.0     ---
Argus Research Corp.          78.0    -0.2%
Banc of America Securitie     ---     -0.1%
Banesto                       74.9    -0.1%
Bank of Tokyo- Mitsubishi     74.9     0.0%
Bantleon Bank AG              74.0    -0.1%
Barclays Capital              75.0     ---
BBVA                          72.5     0.0%
BMO Capital Markets           74.9    -0.2%
BNP Paribas                   75.0    -0.1%
Briefing.com                  74.0     0.0%
Calyon                        74.5     ---
CEMEX                         75.2    -0.2%
CIBC World Markets            70.0    -0.1%
Citi                          74.5    -0.2%
Commerzbank AG                70.0    -0.1%
Credit Suisse                 74.0    -0.1%
Daiwa Securities America      74.0     0.0%
Danske Bank                   76.0     ---
DekaBank                      74.5     0.0%
Desjardins Group              74.3     0.0%
Deutsche Bank Securities      75.0    -0.1%
Deutsche Postbank AG          75.0    -0.2%
Dresdner Kleinwort            74.5     0.0%
DZ Bank                       74.0    -0.2%
First Trust Advisors          75.0    -0.1%
Fortis                        75.0     ---
FTN Financial                 74.0     ---
Global Insight Inc.           76.0     ---
Goldman, Sachs & Co.          ---     -0.1%
H&R Block Financial Advis     75.5    -0.2%
Helaba                        74.5     0.1%
High Frequency Economics      75.5    -0.2%
Horizon Investments           74.2    -0.3%
HSBC Markets                  74.0     0.0%
IDEAglobal                    74.9    -0.1%
ING Financial Markets         71.0    -0.1%
Insight Economics             74.0    -0.1%
Intesa-SanPaulo               74.5     ---
J.P. Morgan Chase             74.0    -0.1%
Janney Montgomery Scott L     ---     -0.2%
JPMorgan Private Client       74.8     0.0%
Landesbank Berlin             75.0    -0.1%
Lehman Brothers               75.0    -0.1%
Lloyds TSB                    75.6    -0.2%
Maria Fiorini Ramirez Inc     ---      0.0%
Merrill Lynch                 70.0    -0.2%
MFC Global Investment Man     74.0    -0.2%
Mizuho Securities             76.0    -0.2%
Moody's Economy.com           74.5     0.1%
Morgan Keegan & Co.           ---     -0.3%
Morgan Stanley & Co.          ---      0.0%
National Bank Financial       74.0    -0.1%
National City Bank            76.5    -0.2%
Nord/LB                       76.0     ---
PNC Bank                      ---     -0.1%
RBS Greenwich Capital         74.0    -0.1%
Ried, Thunberg & Co.          74.0     0.0%
Scotia Capital                ---     -0.2%
Societe Generale              76.0     ---
Stone & McCarthy Research     74.0    -0.1%
Thomson Financial/IFR         74.5    -0.1%
UBS Securities LLC            74.0    -0.1%
Unicredit MIB                 77.0    -0.2%
University of Maryland        74.0    -0.2%
Wachovia Corp.                ---     -0.1%
Wells Fargo & Co.             76.0     0.0%
WestLB AG                     74.5    -0.1%
Westpac Banking Co.           76.0     0.0%
Wrightson Associates          75.0     ---
============================================

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

Last Updated: January 18, 2008 00:22 EST