Autumn to bring economic recovery along: Gail Fosler

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The Conference Board's leading economic index is one of the key tools used to forecast the trajectory of the US economy. With the index rising for the third straight month in June, is the recession losing steam? Speaking exclusively to CNBC-TV18, Gail Fosler, President of the Conference Board commented on how different the current economic conditions in the US are from those back in March.

"March was actually the point of maximum stress both with the US and the global economy. I think we are beginning to stabilise in terms of the economic decline but I think it is very important that we not over state either the likely strength of the recovery or how good it is going to make us feel," she said.

Confident that the recovery would start in autumn this year, Fosler said, "Looking at the economy, something which was very striking in both Q4 and Q1 is that the business sector reacted to the financial crisis as if the world was going to come to an end. This lead to the cuts in inventory and investment, the pressure to increase working capital and consumer spending declines, which were really quite chilling. It was a shock effect to a crisis. That shock is over and I think we see inventory stabilize in most of the dynamics in this early phase of seeing very modest gross domestic product (GDP) growth, will be a stabilisation and a slightly improvement in what is been excessive inventory and investment reductions."

Here is a verbatim transcript of the exclusive interview with Gail Fosler on CNBC-TV18. Also watch the accompanying video.

Q: At the Conference Board itself I am told that the data that was very recently released indicates the possibility of a recovery in autumn this year. That's the earliest recovery that anyone has forecasted from within all the various expert voices that we hear. What is it that you're seeing that gives you confidence that there might be signs of recovery in the US economy in autumn itself?

A: I think autumn obviously extends into the fourth quarter. As we are looking at the economy, one of the things which was very striking in both the fourth-quarter and the first-quarter is that the business sector reacted to the financial crisis as if the world was going to come to an end and so the cuts in inventory and investment, the pressure to increase working capital and consumer spending declines, which were really quite chilling. It was a shock effect to a crisis. That shock is over and I think we see inventory stabilize in most of the dynamics in this early phase of seeing very modest gross domestic product (GDP) growth, will be a stabilisation and a slightly improvement in what is been excessive inventory and investment reductions.

Q: But the data on the housing market is rather mixed and the unemployment numbers continue to clock record highs, so how do you read those mixed signals and how do they feed into your assessment of a recovery?

A: I think you raised a just a very important issue that gets lost in this debate about recession and recovery. Recovery is really when you get the normal dynamics of the economy sort of feeding on each other-very much like you have a patient that comes out of surgery goes through a period of stabilisation and then all of the health dynamics begin to work together. Our view is that, that kind of dynamic recovery process is probably a year away, may be even two-years away and so these issues that you're raising about the high unemployment, about consumers concern about their portfolios, all the mixed signals in the housing market, the still very weak prices, the loss of wealth in housing sector are all going to keep this recovery very muted.

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