Key index points to weakened expansion

The economy “is not falling apart but not showing any great signs of reacceleration either,’’ said Joshua Shapiro, chief US economist at Maria Fiorini Ramirez Inc. in New York. “We’re in the doldrums. It is consistent with sluggish growth.’’

Economists projected a 0.2 percent rise in the June leading index, according to the median forecast in a Bloomberg News survey. Estimates of the 51 economists ranged from a drop of 0.1 percent to an increase of 0.6 percent. Stocks rallied as European officials announced a plan that will give additional aid to Greece and as Morgan Stanley’s results beat estimates. The Standard & Poor’s 500 Index climbed 1.4 percent to 1,343.8 at the 4 p.m. close in New York.

Manufacturing in the Philadelphia area rebounded in July from its first contraction this year, a sign the industry is recovering from earlier supply shortages caused by Japan’s earthquake in March, another report showed.

The Federal Reserve Bank of Philadelphia’s general economic index rose to 3.2 from minus 7.7 the prior month. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey, and Delaware.

The labor market is struggling to gain momentum. Initial jobless claims increased by 10,000 to 418,000 last week, the Labor Department said today.

“The labor market is still quite fragile,’’ said Tom Porcelli, chief US economist at RBC Capital Markets Corp. in New York, who correctly forecast the rise in claims. “The pace of firings continues to move sideways and it’s obvious there is not a lot of hiring going on. There is not a lot of demand right now.’’

The lack of hiring helps explain why consumers have little to cheer about. Consumer sentiment was little changed last week as Americans’ optimism over their finances clashed with growing pessimism about the state of the economy. The Bloomberg Consumer Comfort Index was minus 43.3 in the period to July 17, the highest since April.

Five of the 10 components of the Conference Board’s leading index contributed to the June gain. The biggest contribution came from an increase in the money supply followed by a positive spread between short- and long-term interest rates and a gain in building permits.