A key US economic forecasting gauge rose in June for the third consecutive month, suggesting the struggling economy will strengthen in the second half of 2003, a private research firm said yesterday.

The Conference Board said the index of leading indicators rose 0.1 per cent in June, slightly below expectations of Wall Street economists, who had forecast it to rise 0.2 per cent.

"After a weak first half, the leading economic indicators are suggesting a better economic performance in the second half of 2003," Conference Board chief economist Mr Ken Goldstein said in a statement.

But Mr Goldstein warned that, even if better growth developed in the third quarter, it could take until the first quarter of next year before the labour markets really improved. The unemployment rate rose in June to a nine-year high of 6.4 per cent.

"Business investment in equipment and inventory restocking were the missing ingredients so far this year. The US economy will not grow by more than 2 per cent in the second half of 2003 unless this investment rises," Mr Goldstein said.

Spending by corporate America has fallen far short of levels before the economic slump, and economists believe a true recovery will not take place until investment kicks in and firms start hiring more workers and buying new equipment.

June's small gain in the leading indicator builds on the impressive 1.1 per cent increase in May, raising analysts' hopes the timid recovery in the world's largest economy may be gaining momentum. "It supports the idea, given May and June together, that the economy appears to be recovering but, of course, we have been here before," said Banc of America Securities senior economist Mr Peter Kretzmer.

The Conference Board said four of the 10 indicators that make up the leading index rose in June, led by real money supply, stock prices, building permits and the inverted average weekly initial claims for unemployment insurance.