What the latest data show: Recession likely to end in Sept.
— -- The June update of the USA TODAY/IHS Global Insight Economic Outlook Index continues to show signs that the economy will start to recover mildly around October.
The decline in real GDP growth accelerated from minus 3.5%, at a six-month annualized growth rate, in December 2008 to minus 6% in March. It slowed to a more moderate minus 4.3% in June, and is expected to reach the break-even point around October-November. Recent gains in the index, though small, have been consistent, which is a good sign.
Seven of the eleven leading indicators in the Economic Outlook Index were positive contributors in June: building permits, non-defense capital goods orders, stock prices, ISM export orders, the interest rate yield curve, light vehicle sales, and the corporate bond spread. Four indicators had a negative effect on the index, including slightly fewer hours worked, a decline in the average growth rate of real money supply, a modestly tighter real federal funds rate and higher crude oil prices.
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.
To forecast real GDP growth, IHS Global Insight designed a model that produces a weighted composite of 11 leading indicators. The list includes a mix of economic and financial "forward-looking" indicators that have a strong correlation with future economic activity. As a group they accurately forecast economic growth and are sensitive to signs of stress in the economy.
For each indicator, the model compares a moving average of the latest three months to a moving average over the past year. This enhances their predictive power in forecasting real GDP growth.
