Nation's GDP expected to grow in Q4, economic index predicts

— -- The USA TODAY/IHS Global Insight economic outlook index predicts GDP growth for October through December, the first increase since September 2008. Helping fuel the growth was improvement in financial indicators, such as the stock market, and increases in building permits. The rate of decline in the number of hours worked has also stabilized.

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, at a six-month annualized rate, slowed from -5.9% in March to -2.8% in July. It's expected to reach the break-even point in October and increase progressively through the end of the year. Recent gains in the index, though small, have been persistent, which is a good sign.

Seven of the eleven leading indicators in the Economic Outlook Index were positive contributors in July: building permits, non-defense capital goods orders, stock prices, ISM export orders, the interest rate yield curve, light vehicle sales and the real federal funds rate. Three indicators had a negative effect on the index, including the corporate bond spread, a decline in the average growth rate of the real money supply and higher crude oil prices. One indicator was neutral: the decline in the number of hours worked has stabilized.

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.