More signs of economic life seen.
This week in addition to the improving economic signs contained within the Federal Reserve Beige Book Report, two more measures of improving optimism were released. And Friday's news from FedEx and Cliffs Natural Resources was more proof of the existence of green shoots.
Now we often have to remind researchers that what consumers say and do can be two very different things. Still, in an economy driven 70% by consumer spending consumer and small business owner sentiment is important.
Consumer Sentiment Continues to Rise
1st - The Reuters/University of Michigan preliminary index of consumer sentiment increased to 70.2 this month from 65.7 in August. This increase exceeded expectations. The University of Michigan measure of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars and homes is part one of the survey. Part two - The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending also rose.
Small Business Owners Becoming Optimistic About Future
2nd -The National Federation of Independent Business, which surveys its members each month, said its index of business owner optimism rose 2.1 points to 88.6 in August, an increase that NFIB chief economist William Dunkelberg called "a big gain." The optimism, though, is about the future, as owners still have a dim view of current economic conditions. Dunkelberg noted that small businesses generally aren't planning big capital expenditures or to start hiring again. "First you have to feel better before you'll spend your money," Dunkelberg said
Sales Rose And Inventory Declined.
In a separate report, the Commerce Department said orders for durable goods — products that are meant to last a number of years — soared in July at the fastest pace in two years. Orders in the transportation sector had their biggest gain in nearly three years. No-doubt that was the result of cash-for-clunkers which is now over.
In yet another sign that future business should improve A Commerce Department report showed wholesalers’ inventories fell again in July, after a drop in June. Wholesale inventories have had the longest series of declines since records began in 1987. Given durable goods sales, have rose for three consecutive months, the belief is firms will need more workers to build inventories back up.
Friday's News from FedEx and Cliffs Resources showed two more positive signs
We closed the week with FedEx tacked on $4.66, or 6.4%, to 77.32, after the package delivery giant said its fiscal first-quarter earnings will exceed its previous expectations and projected a profit this quarter above analysts' estimates as the company benefits from international improvement.
And Cliffs Natural Resources rose $2.13, or 7.6%, to 30.23, after saying it expects its North American iron-ore and coal sales this year to be slightly better than it previously thought as customers increase steel production.
For sure the economy is no longer in a free fall as it was in Q4 2008 and Q1 2009. There might be positive growth lead by Government spending. The Fed Ex earnings boost is a major positive as private sector activity gives a more realistic view of the recovery.
ReplyDeleteHowever, in my opinion the U.S. Economic growth might remain sluggish for a long period and we would not see peak economic activity of 2006-07 even in the next 3-4 years.
What remains to be seen is that will the Government have to do more (in terms of stimulus) to keep the economy going and how that will impact the deficits.
No question without job growth in the USA the recovery will be weak. If it was week after the 2001 business spending recession it will be even weaker now. I'm not one to forecast beyond the next 12 months so I'll not guess on the years 2011 and beyond. But the trends which have been in place for two decades will continue to erode jobs which unlike 2001-2005 were more than offset by a booming real-estate sector which is now gone.
ReplyDelete