New York ? A key gauge of U.S. economic activity fell in July, another sign of a shaky economic recovery, as stock market gyrations affected consumer and business spending.

The New York-based Conference Board reported Monday that its Index of Leading Economic Indicators fell 0.4 percent to 111.7, after falling a revised 0.2 percent in June. Analysts had expected a July decline of 0.5 percent.

“The economy has hit a soft spot, and some people are calling it an air pocket,” said Mark Vitner, senior economist with Wachovia Securities.

The index measures where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year. July’s decline was the third time in the last four months that the indicators index failed to increase.

Contributing most to last month’s decline were stock prices, the Conference Board said.

“Volatile financial markets, corporate scandals and sagging consumer expectations are trouble spots,” said conference board economist Ken Goldstein.