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U.S. economic growth appears ready to decelerate in the second half of the year, a key gauge of future activity showed, suggesting that recent slowdowns in real estate, manufacturing, job creation and stock markets could be dragging on the economy at large.

The index of leading indicators -- a grouping of government gauges that economists use as a sort of crystal ball for forecasting the course of the economy -- dropped 0.1% in May following a flat reading in April, the

Conference Board

, a private research group, said Wednesday.

The decline is the second in four months, and puts the index at 106.0, measured relative to a 1996 level of 100. The index had risen 0.1% in March following February's sharp 0.3% drop.

The data suggest that efforts by the

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Federal Reserve

to raise interest rates and slow economic activity are putting the breaks on the rapid rate of U.S. economic growth seen in recent years. By slowing economic activity, the Fed has sought to bring booming U.S. consumer demand in balance with domestic supply, reducing the risk of inflation.

"The modest pace in the leading indicators in recent months clearly indicates some loss of momentum in the pace of economic activity," said Ken Goldstein, economist at the Conference Board. "The signals now point to sustained expansion, but not at the rapid pace we saw at the start of 2000."

The Fed has raised short-term interest rates six times in the past year, but refrained at its most recent meeting. Fed policy makers, yielding to the same economic gauges that comprise the leading indicators, said: "Recent data suggest that the expansion of aggregate demand may be moderating toward a pace closer to the rate of growth of the economy's potential to produce."

The components of the leading indicators hinting at the largest degree of slowdown in May included shorter work weeks for manufacturing employees, continuing weakness in stock prices, growing claims for unemployment benefits and a drop in building permits for new construction.

The weakness was partially offset by continued strength in factory orders for consumer goods, as well as steady spreads between corporate borrowing rates and government bond rates, a measure of the risk associated with financial markets.