Business index signals slowdown

The government's sensitive index of leading indicators climbed just 0.3 percent in July, the smallest gain in a year. The Commerce Department said Wednesday it was another sign the recovery is leveling off.

The 11 consecutive months of improvement in the composite index is the longest unbroken increase since a 17-month period that ended in July 1976. The strong economic growth the index foreshadowed early in the year came true shortly afterward in the second quarter. But now the index suggests the economic recovery will be settling down toward the end of the year.

Commerce Secretary Malcolm Baldrige said the slowdown apparently in store for the recovery should be welcomed, since it means there will be less reason for prices to go up. ''July's modest rise in the leading index is an early indication that the economic rebound of the second quarter will taper to a more sustainable pace,'' he said.

Although 7 of 11 indicators were positive in July, the single biggest change was a drop in new orders for factory machinery and other equipment, adjusted for inflation, which held back overall improvement. The orders setback, a 1.7 percent decline, was reported separately Tuesday by the Commerce Department and is expected to have a big influence on how busy factories will be in the weeks and months ahead.