Stocks Gain on Home-Sales Data

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The National Association of Business Economists said Monday that the "Great Recession is over," with the "vast majority" of business economists revising their growth forecasts higher. But, the NABE also believes the recovery will be more moderate than those typically seen after steep declines in economic activity. New NABE estimates show GDP growth is expected to rise at an above trend 2.9% pace in the second half of this year, following declines of 6.4% in the first quarter and 0.7% in the second. The housing market contraction is seen coming to an end after three years, with a substantial rebound anticipated, albeit from a very low base.

Key areas of concern, however, are the burgeoning budget deficit and the high unemployment rate. The unemployment rate is expected to hold at an average of 10% from this quarter to the second quarter of 2010. Firms are expected to start adding jobs relatively soon. Inflation is expected to remain subdued.

European Central Bank President Jean-Claude Trichet repeated that rates are appropriate. He added that "as of today it is premature to declare the financial crisis over", but added that "when the time comes there should be no doubts about the ECB's determination and ability to exit". Trichet stressed again that the ECB "will make sure extra liquidity measures are phased out in a gradual and timely fashion in order to counter any threat to price stability over the medium and long term".

International Monetary Fund Managing Director Dominique Strauss-Kahn said it is still too early for a general exit from stimulus policies, and that governments should err on the side of caution, with a late exit being potentially less damaging than an early one. In a speech in London, Strauss-Kahn said that, while conditions in the global economy are improving, they remain highly vulnerable, threatened by undercapitalized banking systems, weak household finances, high unemployment and large public deficits. He added that designing and communicating plans for fiscal consolidation should be the top priority, especially for advanced economies, where there is "little sign" of inflationary pressures, and monetary policy can afford to stay accommodative for "some time."

British Prime Minister Gordon Brown said ending fiscal stimulus too soon would smother economic growth, seeking to build on a poll showing his Labor Party trailing the opposition Conservatives by the thinnest margin this year. "We should be careful not to abandon that stimulus too rapidly," Brown told business leaders today at the Confederation of British Industry conference in London. "Choking off recovery by turning off its life support too early would be fatal for global growth."

Andrews is managing editor of the Investing Channel for BusinessWeek.com .

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