Index forecasts a strong 4th quarter recovery, moderating in early 2010

— -- The USA TODAY/IHS Global Insight economic outlook index predicts a strong recovery in the last quarter of 2009 followed by a more gradual rebound in the first part of 2010.

The forecast predicts strong 4th quarter growth as a direct result of improvements in building permits (and subsequent home sales), higher capital goods orders, increasing stock prices, a reduction in the rate of decline in hours worked and firms increasing inventories as demand recovers. Better growth prospects in the rest of the world have also increased export orders.

The forecast expects growth to slow in early 2010 as the effect of the government stimulus programs, such as "cash for clunkers" and the first-time home-buyer tax credit, fade and firms reduce inventory growth.

The index predicts future real GDP growth (gross domestic product, adjusted for inflation) based on 11 leading economic and financial indicators. The decline in real GDP growth, at a six-month annualized growth rate, slowed from -5.9% in March to -0.3% in August. Real GDP growth is back in positive territory posting an increase of 1.3% in September. It's expected to increase progressively through the end of the year and then moderate in early 2010.

Seven of the eleven leading indicators in the Economic Outlook Index were positive contributors in September: hours worked, building permits, real non-defense capital goods orders, stock prices, ISM export orders, the real federal funds rate and the interest rate yield curve. Four indicators had a negative effect on the index, including the money supply, crude oil prices, light-vehicle sales and the corporate bond spread.

About the USA TODAY/IHS Global Insight Economic Outlook Index

USA TODAY and IHS Global Insight, a top-rated economic analysis and consulting firm, created this index to help readers track the economic recovery.

The index predicts future gross domestic product (GDP) growth. Real GDP is the value of goods and services produced in the U.S., adjusted for inflation. It is a key measure of economic activity and an important factor in determining whether the economy is in a recession.