new york (Bloomberg) — The US economy will start to pull out of a recession by year-end, helped by "remarkable growth" in productivity and a depletion of inventories, former Federal Reserve chairman Alan Greenspan said.

"A lot of pieces are falling into place for recovery," Greenspan said today in a speech in New York. He predicted "a fairly pronounced recovery not only in the US", but globally. "Surprises are on the upside."

Greenspan said last month the US economy could resume growth with a 2.5 percent expansion in the current quarter, while adding there was still a risk of a "second wave down".

Stabilisation of housing markets and manufacturing, a lessening of financial turmoil and increased government spending all suggest the longest recession since the 1930s may be close to ending. Fed chairman Ben Bernanke said last month the US economy was "leveling out" and may resume growth "in the near term".

The world's biggest economy contracted at a one percent annual pace in the second quarter, and economists surveyed last month by Bloomberg News predicted growth would average 2.1 percent in the second half of the year.

Productivity is helping the recovery, Greenspan said at Rodman & Renshaw's annual global investment conference. The economy is still laden with "excess inventories" that may be worked off by the end of the year, he said.

"Comeback will be accelerated" by "remarkable growth in output per hour", he said. Businesses have waged a "huge cost-cutting programme" that has bolstered profits.