The U.S. Conference Board forecasts that the U.S. economy is moving toward recovery, with real GDP rising by a projected 1.3% this year and climbing to 4.2% in 2003.

A stabilizing job market, strong consumer spending and improving business balance sheets are major forces propelling the recovery forecast Conference Board chief economist Gail Fosler. “`For the time being, the United States has weathered the crisis of September 11 with relatively minor economic damage in the form of a mild recession which has all the signs of ending very soon.”

While growth is expected to be slow in coming months, a major turnaround in profits is ahead. Rising productivity has become a potent growth factor in the U.S. and should lead to increasing profits, which have been under pressure. “This is the first time since the 1970 recession that business productivity has risen in the early stages of a recession,” Fosler notes “and today’s gains are considerably larger.”

While the business sector has clearly been the big drag on growth over the last year, signs of an upturn are mounting. Declining financing requirements, partly based on better cash flow, and the rising availability of credit suggest better times ahead. Business’ unprecedented need for credit and accommodating lenders created a massive credit squeeze last year that knocked down inventories and curtailed business investment. The forces that created this credit contraction appear to be easing.

The Conference Board analysis also notes that businesses in many industries are building their balance sheets. Fosler suggests that businesses may have to finance their own growth. “As in the early 1990s,” she declares, “businesses will once again have to become their own bankers, financing their productivity and competitive improvements from cash flow.”