New Delhi

The Conference Board announced on Tuesday that it was abandoning long-standing prediction of an imminent recession in the United States.

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Despite the downturn in its Leading Economic Index (LEI), which suggests a stagnation in economic output in the upcoming months, the organisation noted positive signals indicating economic resilience

Reuters cited Justyna Zabinska-La Monica, senior manager of business cycle indicators at the Conference Board, who said, "While the declining LEI continues to signal headwinds to economic activity, for the first time in the past two years, six out of its 10 components were positive contributors over the past six-month period."

This shift, she highlighted, has led the leading index to no longer foresee a recession looming ahead.

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The Conference Board's index, designed to anticipate future economic trends, experienced a 0.4 per cent decline in January, reaching its lowest level since April 2020.

Despite this prolonged downturn, the rate of decline over a six-month period has markedly slowed, suggesting a less pessimistic outlook compared to previous months.

Matthew Martin, a US economist at Oxford Economics, echoed this sentiment, affirming that despite the index's overall decline, key indicators poised for improvement hint at sustained economic growth.

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The reversal of the recession forecast can be attributed to several factors, including the recent surge in stock prices and the Federal Reserve's signalling of a shift in monetary policy.

The rally in stock markets, with the S&P 500 index surging by over 20 per cent since late October, has injected optimism into the economic landscape, signalling confidence in the Fed's commitment to curbing inflation without stifling growth.

Additionally, indicators such as low unemployment filings and promising metrics in credit availability, home building permits, and manufactured goods orders have contributed to the newfound optimism.

Despite the positive outlook, concerns linger regarding the economy's short-term performance.

Zabinska-La Monica cautioned that growth in the second and third quarters could hover around zero, indicating potential challenges ahead.

 Nonetheless, economists remain hopeful, citing the strength of the labour market, improved financial conditions, and stronger consumer spending as factors underpinning optimism for continued economic expansion.

(With inputs from Reuters)