By Harold Brubaker
RISMEDIA, March 28, 2009-(MCT)-A run of encouraging economic reports that have recently been released may mean the worst, panic-inducing stage of the economic downturn is over. Emphasis on the word may. “I think there are signs of economic life,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, PA, said. “The downturn is no longer intensifying, and the clearest evidence of this can be found in the retail sector as retail sales have turned since the beginning of the year,” Zandi said.
Upbeat economic indicators, including government reports showing gains in durable-goods orders and new-homes sales, may not mean the economy has struck bottom, however. Job losses will continue, and growth is not expected until late this year, economists said.
Gloomier economic forecasts, by the likes of Martin Feldstein, a Harvard University economics professor and a member of President Obama’s Economic Recovery Advisory Board, have pushed the turnaround well into next year, according to a Reuter’s interview.
Even relatively optimistic economists are quick to warn that not too much should be read into reports like these released by the Commerce Department on new-home sales and durable-goods orders.
New-home sales in February jumped 4.7% to an annual pace of 337,000 from a record low in January. February marked the first increase in sales since the summer, and the report added to a string of “better-than-expected” housing data, according to Wachovia Bank economist Adam G. York.
New orders for computers, machinery, and other durable goods climbed an unexpectedly strong 3.4% in February as well. “This was a surprisingly strong bounce in view of the severe global recession,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight Inc., “but we would not read too much into it,” as he said he expected the overall downward trend to continue for several more months.
Zandi called the climb in durable-goods orders a hopeful sign and pointed to other reasons for optimism, including the rally in the stock market. “That’s important in terms of the collective psyche,” he said.
The Standard & Poor’s 500 stock index has gained 20% since March 9 – when it closed at a level last seen more than a decade before and The Dow Jones industrial average has risen 18.4% in the same amount of time.
The tax portion of the federal-stimulus program is kicking in, as a decline in tax withholding is starting to boost take-home pay, Zandi said, which could bolster the positive trend in consumer spending seen earlier this year.
William C. Dunkelberg, an economics professor at Temple University, said pent-up demand in the economy was huge because consumers had reduced spending out of fear. “As confidence returns,” he said, “they’ll spend.”
Dunkelberg went out on a limb and said that the economy had bottomed, citing the gain in construction, the upturn in new-home sales, and the decline in inventories to record lows.
An executive at National Penn Bancshares Inc. is not ready to go that far. “I think our stance here is to prepare for the worst and be pleasantly surprised if things turn out better,” said Michael R. Reinhard, the Boyertown, Pa., bank’s chief financial officer. “We’re not ready to call this the bottom, and everything’s uphill from here.”
Copyright © 2009, The Philadelphia Inquirer
Distributed by McClatchy-Tribune Information Services.
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