A measure of the U.S. economy's prospects scaled a 1-1/2-year high in August but a record rise in home loan defaults cast doubts on the durability of the apparent recovery from recession.

The Conference Board said on Monday its index of leading economic indicators rose 0.6 percent to 102.5, the highest level since January 2008. It had advanced 0.9 percent in July.

It was the fifth straight month that the gauge, which is supposed to forecast economic trends six to nine months ahead, had increased. The gain was a touch below the 0.7 percent rise economists had forecast. The index has risen 4.4 percent during the past six months.

These data add further evidence to the growing view and our long-held belief that the official end date of the recession is likely to be sometime in the third quarter, said Michelle Girard, an economist at RBS in Greenwich, Connecticut.

However, separate monthly data from credit bureau Equifax Inc showed a record 7.58 percent of U.S. homeowners with mortgages were at least 30 days late on payments in August, up from 7.32 percent in July.

U.S. financial markets were mute to the data and analysts said investors were awaiting the outcome of the Federal Reserve's two-day policy meeting on Tuesday and Wednesday.

U.S. dollar strength ahead of the Fed meeting weighed on commodity prices and took some shine off stocks on Wall Street <.N>, after rallying for much of last week.

The Fed is expected to leave benchmark overnight lending rates unchanged near zero, but the statement accompanying the rate decision will be scrutinized for clues as to when the U.S. central bank will start withdrawing some of the support it is lending to the economy.

UNEMPLOYMENT TO SLOW RECOVERY

While economists agree the United States is starting to emerge from its worst recession since the 1930s -- with a solid rebound seen in the third quarter -- there are concerns that stubbornly high unemployment could undermine the recovery.

The unemployment rate raced to a 26-year high of 9.7 percent last month and is expected to peak just above 10 percent early next year.

A restocking of inventories, which were drawn down to record lows to adjust to sluggish demand, and government programs like incentives for first-time homebuyers and some motor vehicle buyers, are expected to drive growth in the third quarter.

In August, the U.S. economy's prospects were lifted by rising supplier deliveries, stock market prices, building permits and consumer expectations, according to the Conference Board, a private sector research group.

Analysts said separate indexes in the report also offered some encouragement. The coincident economic index was unchanged at 99.8 in August, while the lagging index slipped 0.1 percent to 110.2 -- pushing up the so-called coincident-to-lagging ratio for a fifth straight month.

The coincident-to-lagging ratio, which tends to trough and turn up well before the official ending of recessions, has a good track record of foreshadowing an economic recovery, according to economists.

This continues to suggest strongly that this recession is over. But whether or not the economy can keep grinding forward and at what speed is still a big question mark, said Jennifer Lee, an economist at BMO Capital Markets in Toronto.

Real money supply, average weekly initial claims for unemployment insurance and manufacturers' new orders for nondefense capital goods were a drag on the main leading index in August. Weekly manufacturing hours and manufacturers' new orders for consumer goods and materials were steady.

Our view is that it's not a sustainable (recovery) because that's a lot of special factors ... By the end of the year we should see slower momentum, said Brian Bethune, U.S. economist, IHS Global Insight in Waltham, Massachusetts.

(Additional reporting by Nick Zieminski, Editing by Chizu Nomiyama)

Unemployment