NEW YORK - The contest between economic forecasting tools is a little like the war between supermarket tabloids over who has the best psychic.
Economic indicators won't help anyone find out when Elizabeth Taylor will remarry, but they are vital to planners in government and corporate America.
The Commerce Department insists that its index of leading indicators is the best predictor of which way the economy is headed, toward prosperity or recession.
But the venerable index is under attack from people who say it ignores the growing service sector of the economy; that is, lawyers, accountants and hamburger flippers.
It is also under fire from those who say the best forecasters of the economy are ordinary Americans who pick up telltale signs in their daily lives of working and shopping.
The debate gained prominence again this past week as the government announced the leading indicators jumped 1.4 percent in June for their biggest rise in 1 1/2 years.
The muted reaction in the financial markets might have been a sign of skepticism about the index's clairvoyance. Significantly, bond prices rose even though they usually fall in reaction to strong growth because of inflation fears.
People who say the service sector is being ignored have created a new index of the services industry under the direction of Geoffrey Moore, Columbia University's guru of business cycle research.
In contrast to the strength of the government's measure, the leading index of services for June showed only a modest gain, suggesting to its authors that ``growth in service sector activity will continue at recent levels or possibly weaken slightly during the remainder of 1988.''
As for the voice of the people, the Conference Board asserts the superiority of its own monthly survey of 5,000 consumers, claiming the consumer expectations component of the survey has outperformed the government's leading index since 1983.
Consumers are the first people to notice signs of economic change such as changes in the price of milk or expansion of the night shift, said Fabian Linden, executive director of the board's Consumer Research Center.
``Consumers experience economic events as they happen, not after they are digested and analyzed in Washington,'' he said in a statement prepared for The . …