After a batch of stronger-than-expected economic reports lately, some pundits have declared the "soft patch" dead.

In fact, it could make an unwelcome return in the coming months.

While employment gains in October were impressive, industrial production has beaten consensus expectations and inflation has been creeping higher, the Conference Board's index of leading economic indicators (LEI) suggests that growth is going to slow down more than people think.

In October, the LEI fell 0.3%, triple the consensus estimate and the fifth consecutive decline.

"Certainly this is a fairly strong signal that growth is going to lose momentum so that the soft patch that we were in this summer will at least be matched or exceeded by what's coming next," said Ken Goldstein, an economist at the Conference Board.

In June and July, consumer spending decelerated markedly and employment gains slowed to a crawl, in part because of a sharp rise in energy prices. After growing at a 4.5% pace in the first quarter, the economy expanded just 3.3% in the second quarter before climbing 3.7% in the third.

Over the past 45 years, Goldstein said there have been six times when the LEI fell for at least five straight months. In three of those instances, a recession ensued. On one occasion, the economy was already in recession and two other times economic growth slowed down to 1% or 2% for two quarters.

"I'm not saying we're going down to 1% but the impression that the economy is regaining lost ground is counteracted by a very clear and unambiguous signal from the LEI," Goldstein noted. "If you're waiting for 300,000 job gains over the next three of four months, you could well be disappointed."

In October, the economy added 337,000 jobs, although a portion of that gain came from cleanup efforts after hurricanes hit the southern U.S. On Thursday, weekly jobless claims fell 3,000 to 334,000 but the four-week moving average, which smoothes out weekly fluctuations, rose 1,000 to 338,000. The Philadelphia Federal Reserve survey, which fell in November from the previous month, showed a gain in the employment component.

Steven Wieting, senior economist at Smith Barney, is more optimistic than the Conference Board about the outlook for growth. He noted that weakness in the LEI over the past few months has been the result of unusual factors, which are already starting to dissipate.

The election is now over, energy prices are falling, stock prices are advancing and the yield curve is getting steeper, he said. "I doubt the LEI will be down in November. In any event, it had risen so much coming into 2004, this just seems to be a downward correction from an above-trend growth path."

Ian Shepherdson, chief economist at High Frequency Economics, agrees that the LEI is foreshadowing a weaker environment than is likely to materialize.

"On the face of it, this is horrible ... yet this is very hard to square with the latest indicators of demand and output," he said. "The LEI is too gloomy, but it is a reminder that there are risks."

Those risks are amplified, according to some pundits, because of the

Federal Reserve's

desire to hike interest rates to a "neutral" level. The Fed has boosted rates four times since late June and traders expect a fifth increase next month.

The language of the Fed's policy statements and speeches from various Fed officials suggest that the goal has not been to slow down the economy but to remove the stimulus that was put in place after a recession and the terrorist attacks of 2001. Still, tightening campaigns under Fed Chief Alan Greenspan have rarely ended well.

Of the five tightening cycles, Merrill Lynch notes that there have been two recessions in 1990-91 and 2001, one soft landing in 1995 and two financial meltdowns in 1987 and 1997-98.