By Dennis Seid/NEMS Daily Journal
A flurry of recent reports suggest that the economy is on the rebound.
Last week, The Conference Board said that the Consumer Confidence Index in April rose to 57.9, the highest since a 61.4 reading in September 2008.
If you’ll remember, that was right before the markets and the index plummeted. Lehman Brothers collapsed, AIG and others were getting bailed out, and the financial industry appeared to be heading “toward the precipice.”
Also last week, earnings season began, and the numbers have been pretty good. And on Friday, the Commerce Department said the economy grew 3.2 percent in the first quarter.
The stock market has been moving nicely upward since the beginning of the year. Concerns about some economic instability in Europe – namely, Greece’s burgeoning debt crisis – have pulled back the markets a few times, but overall, stocks are on a roll.
As for the Consumer Confidence reading for April, it should be noted that it’s a far cry from the 90 that’s considered a “healthy” reading. But it’s also much better than the pathetic 25.3 reading in February 2009, an all-time low.
The survey revealed that more consumers plan to buy automobiles and appliances.
That’s a good sign, considering we had the “Cash for Clunkers” last year and we have the “Cash for Appliances” this year. Subsidizing consumer purchases is a zero-sum game, and the sooner consumers are willing to buy goods with their own money, the better.
A report on durable goods showed orders for most large manufactured products rose by the largest amount since the start of the recession. Consumers are buying more electronics and furniture (good news for Northeast Mississippi). And they’re dining out more.
All this is key since consumer spending makes up more than two-thirds of the U.S. economy.
But the Consumer Confidence report also revealed that consumers aren’t buying as many homes. This, despite the first-time homebuyer’s credit that was extended from November and which ended on Friday.
It was the housing industry that played a major role in the economic freefall that began in December 2007. The bubble burst as variable rates went up, people couldn’t afford their homes and the foreclosure wave started.
There was the Great Recession of course, with millions losing their jobs, exacerbating the housing woes.
While the closely watched Standard Poor’s/Case-Shiller home price index rose for the first time in more than three years in February, its increase was half of what analysts had expected. Sales of new homes jumped 27 percent in March, the biggest rise in 47 years. But analysts say that’s because of a final run on the tax credit, and that a drop-off is imminent.
New home sales, in fact, are down 70 percent from their peak in July 2005.
Another worry is that, despite consumer spending picking up, the number of jobs isn’t. The rate of jobless claims and layoffs have slowed, but we’re still not generating enough new jobs.
Then we have the specter of higher oil and gas prices that could put another damper on economic growth.
Is the worst over? Probably.
As the Fed said last week after voting to keep key interest rates low, the pace of recovery “will likely remain moderate.”