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Positive signals ahead of Greenspan


New York-based research agency is at loggerheads with widespread perception that the US economy is going towards recession. It is actually accelerating, they claim.

US Federal Reserve chairman, Alan Greenspan made his semi-annual visit to Capitol Hill on Wednesday amid concerns over rising inflation. But "leading indicators" developed by a highly respected economic think tank in New York are beginning to point to an acceleration, not deceleration, in the US economy, reports CNBC-TV18.

New York based Economic Cycle Research Institute, ECRI, is an independent research firm which has been polishing up its work on leading indicators. In 2001, most economists said there would not be a recession in the US. ECRI said based on its leading indicators a recession was actually una able. Now once again ECRI is at odds with the consensus view on the US economy, which says the rate of growth in the US will slow in the face of rising inflation and interest rates.

Lakshman Achuthan of Economic Cycle Research Institute said, 'the growth cycle of US Economy is very essentially healthy. We have a very resilient economy and one is increasingly likely to accelerate towards the end of the year."...

Achuthan says the Bears are wrong. The US economy is not that vulnerable to inflation or interest rate shocks.

Looking at the spate of mergers in the US recently, the cash balances that companies are sitting on and the recent rally in US stocks you might be tempted to buy ECRI's argument. But traditional forecasters criticize the leading indicators. They say groups like ECRI are trying to time the market, something that is difficult if not impossible to do.

There is news for India as well; the long leading index is beginning to show a slower rate of growth for the country. But in the US the divergence between the leading indicators and the consensus view makes investing that much more difficult - a challenge for some, a nightmare for others.