An index intended to show the future direction of the U.S. economy fell 0.3% in February, the fifth consecutive monthly drop, according to preliminary estimates by the U.S. Conference Board.

The private research group said that its composite index of leading indicators fell to 135.0 in February after a revised 0.4% drop in January, a 0.1% decline in December, a 0.5% decline in November and a 0.5% decline in October.

“The economy may be grinding to a halt,” said Ken Goldstein, labor economist at the Conference Board, said in a release. “Growth will be weak this spring. A small economic contraction cannot be ruled out. The economic signals are flashing yellow.”

The February reading for the leading index was much lower than the 0.2% median increase estimate of economists .

With February’s decline, the leading index has fallen 1.5% — a decline of a 3% annual rate — from August 2007 to February 2008, the Conference Board said. Only two components out of 10 have increased from August to February, it said.

In February, unemployment claims, building permits and consumer expectations made large negative contributions, the board said. Positive contributors were real money supply and interest rate spreads.

The composite index of coincident indicators was unchanged for the third consecutive month in February, at 124.9, after revisions to numbers from November to January due to lower personal income numbers.

The index of lagging indicators was up 0.2% in February at 131.2 after a 0.1% increase the month before.

Meanwhile, the number of U.S. workers filing new claims for unemployment insurance increased sharply last week, matching a two-and-a-half-year high.

Initial claims for jobless benefits jumped 22,000 to 378,000 after seasonal adjustments in the week ended March 15, the U.S. Labour Department said today, matching the highest level since October 2005.

Economists had expected an increase of only 3,000.

The four-week average of new jobless claims, which economists use to smooth out weekly volatility, rose by 6,000 to 365,250, the highest level since October 2005.