Wednesday, September 9, 2009

Light at the end of the recession tunnel

According to the Fed's Beige Book report, the economy appears to be stabilizing across much of the country, with a pickup in factory activity and improvement in residential real estate.  Manufacturers are "cautiously optimistic," with several districts reporting gains in new orders.   In addition, "[m]ost regions reported some improvement in residential real estate.". This is the first optimistic report from the Fed concerning housing since the housing market collapsed in Fall 2008, causing homeowners to lose more than $5 trillion in wealth.  The improved conditions are consistent with the economists' expectations, as reported by MarketWatch Fed says economy stabilizing, that economists expect growth to recover to a 3.0% growth rate in the current July-September quarter, following a full year of negative growth in the deepest and longest recession since World War II.  Another good sign is that demand for temporary workers is picking up, which is generally considered a harbinger of an increase in permanent hires.  Inflation is no threat: even given the huge federal stimulus spending, consumer prices remain steady.  And, my TIAA-CREF account is making money for the first time in a year!!!

Certainly some downsides remain.  Overall, consumer spending is flat and credit remains scarce with weak loan demand given tight credit standards.  And commercial real estate is still suffering, because there is still decreasing demand for office space and high vacancy rates continue to cause a decline in nonresidential construction activity.

But things are looking up.  However, listening to the news on CNN, you'd never know it.  The not-so-loyal opposition to Obama is trying to whip up more anti-Obama sentiment arguing that his economic policies have failed because Obama has not been able to fully reverse the recession during his first seven months in office.  Give the guy a break -- he never promised you a rose garden.  Compared to the black storm clouds we experienced during the fall, we're beginning to see the light at the end of the tunnel.

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