The chances of the United States economy falling back into recession have dropped to just 15 per cent, the International Monetary Fund said this evening in a report suggesting the economy can ride out current weakness.
In excerpts from its latest World Economic Outlook, the IMF said recent economic data suggested the current lackluster US economic performance could be over.
Citing its own Corporate Vulnerability Index and other leading economic indicators, the IMF said the probability of recession rose to 53 per cent just before the 2001 recession and has since been dropping.
"Recently, the recession probability has fallen below 15 per cent, as macroeconomic vulnerabilities associated with corporate balance sheets have fallen, reflecting both declines in both corporate borrowing and debt service burdens," the IMF report said.
"In the past, a sharp fall in the recession probability to a level well below 50 per cent has generally coincided with the end of the downturn," the report said.
The IMF will release its full report, with estimates for global and country-by-country growth, next week at the Washington-based lender's spring meetings.
IMF Managing Director Horst Koehler said last month a global recession could no longer be ruled out should a long war in Iraq push oil prices high and hurt consumer confidence.
The report cautioned that an important risk to the global picture was the housing market, particularly in Britain where prices have posted huge gains since 1996.
Although the risks of a renewed US recession may have receded, the IMF said here was little sign the economy is poised to surge. The lender said companies on both sides of the Atlantic would have to further cut their debts before a truly strong economic expansion will take place.
UK housing prices have shot up about 70 per cent in real terms since the last housing price trough in 1996, while prices in the Netherlands and Ireland have risen even further.
The rise in US home prices is less spectacular, up 27 per cent since 1996 excluding the impact of inflation, but still ranks as the largest boom in the American housing market. And every boom brings with it the possibility of a bust.