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Archive for Friday, September 3, 2010

5 reasons for some optimism about economy

September 3, 2010

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Is there any reason for hope in this gloomy summer for the economy?

A certain fatalism — that a double-dip recession is inevitable — has crept into a lot of economic analysis lately, but it may be overstating the degree to which we are in dire straits. A roaring recovery is probably not on the way, but here are five reasons that a slow-and-steady recovery is likely to continue.

Increased Savings

The savings rate rose from 2.7 percent at the start of the recession, in the beginning of 2008, to 5.9 percent in July. That means households are further along in readjusting their spending patterns to match their incomes than was previously realized. That should make them freer to spend more in the months ahead.

Easier Credit

Gradual healing is under way in the financial sector, making loans more available for households and businesses. The most recent edition of the Federal Reserve’s senior loan officers survey showed that more banks have eased lending standards for corporate loans. For companies with access to global capital markets, interest rates remain quite low, which supports growth.

Industrial Production

The industrial sector is actually holding up. July industrial production was up 1 percent, and early indicators show that the expansion continued last month. The Institute for Supply Management said Wednesday that its index of activity in the manufacturing sector rose in August, to 56.3 from 55.5 (numbers above 50 indicate expansion). It appears that manufacturers view final demand for their products as steady enough to keep producing.

Housing Demand

No one is expecting home-building activity to return to pre-crisis levels for a very long time. But in July, builders began building new housing units at a paltry annual rate of 546,000 annual rate, less than half of what’s needed to keep up with population growth. The housing market just can’t contract that much more. When housing starts fell from a 2.3 million annual rate in early 2006 to the low of 477,000 in April 2009, it was a major drain on the economy, but a decline of that scale is now mathematically impossible.

Export Potential

A steep rise in imports dragged down the economy in the second quarter to an unprecedented degree. If the trade deficit had not widened, the gross domestic product would have grown at a healthy 5 percent annual rate. With many other world economies doing better than the U.S. economy right now, exports may be set to rise more than imports in the coming quarters, which would help domestic growth.

Comments

Jane 3 years, 7 months ago

I got a real chuckle out of the conclusion of the first paragraph...that since people are saving more money and have adjusted their spending habits, that will give them more money to spend in the months ahead. Huh?!

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Eybea Opiner 3 years, 7 months ago

Another Liberal "journalist" trying to make a silk purse out of the sow's ear that is Obama's economic policy.

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notajayhawk 3 years, 7 months ago

"The savings rate rose"

Read: People aren't spending money.

"more banks have eased lending standards for corporate loans"

Lax lending standards is what created this mess.

"It appears that manufacturers view final demand for their products as steady enough to keep producing."

Or maybe they're trying to cut their losses, by keeping their employees working (rather than undergo the expense of hiring new ones later). And it does not necessarily mean they think the demand is there for their products; look up an accounting term called 'contribution to margin'.

"The housing market just can’t contract that much more."

So the 'good' news, a "reason for some optimism", is that it's so bad it can't get much worse? Mmmm, okay.

"With many other world economies doing better than the U.S. economy right now, exports may be set to rise more than imports in the coming quarters"

Um, the very reason their economies are doing better than ours is because they're producing stuff to sell to us.

Hey, you forgot some reasons for "optimism". The unemployment rate is going back up, home sales are dropping off again - why, let's celebrate!

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blindrabbit 3 years, 7 months ago

Don't want to encourage any positive comments on the economy, or anything that might have a positive reflection on the Obama (Anointed One's) administration. Remember the GOP/Teabaggers are the "Party of No" and McConnell, Behner, Palen, Brewer and all the other miscreants and their dittohead media types surely want to minimize any positive news.

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Flap Doodle 3 years, 7 months ago

Here's a reason for optimism about the economy, the Ghost of Mid-Term Elections yet to come is rattling his chains and the Democrats are listening.

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Clevercowgirl 3 years, 7 months ago

Nice to read an article in the JW that makes sense.

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Hope_And_Change 3 years, 7 months ago

Homo sapiens are a pervasive lifeform on the planet. They will find a way to survive. Nanny bloomberg is one of the many lifeform strains that have infested the species.

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Liberty_One 3 years, 7 months ago

I read a similar article on bloomberg that said we don't have to fear another recession because it really can't get much worse than it is now! http://www.bloomberg.com/news/2010-09-01/economy-seen-avoiding-recession-relapse-as-u-s-data-can-t-get-much-worse.html

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