Although
most of the Wall Street regulars who insist the economy will get back on track
soon have quietened down, a few of the die-hard optimists are putting forth a
clever bit of maths to back up their opinions. They say that the second
derivative is turning positive, meaning that, although the economy is still
suffering a massive downturn, it is happening at a slower rate.
It has taken some hearty research and some
stretching of statistics but they do at least have some morsels of data to back
up their assertion. One encouraging sign has been the increase in retail sales,
which gained 1 percent in January compared to the previous month, which is the
first jump since last June.
Another factor is car sales. Although the
figures fell overall, the data for private individual buyers remained
relatively stable.
Many observers expect the economy to
contract at a slower pace in Q1 than in the last quarter of 2008, but only
because of some complicated revisions to the annualized figures.
JPMorgan
Chase analysts have cut down the risk of a “micro-recession” with an index that
has revealed the margin of uncertainty in the economy and the markets has
shrunk a small amount.
Most
will agree that the gigantic government and Federal Reserve stimulus packages
since October have seen a turnaround in corporate bond yields, which have crept
down, and interbank rates improving for the public with the money supply
swelling.
Stuart Poulson, Head of Corporate trading
at Nikko-Desjardins Asset Management remarked recently that the levelling out
of opinion suggests that both demand and manufacturing might be coming back to
their normal margins, but tempered those comments with a warning that what we
are experiencing is still somewhat in the vacuum of the financial crisis.
“Obviously what is going on now is not part
of a normal economic cycle,” Chambers said on his blog Friday. “It’s always a
good thing, however, when sentiment levels out. A production line of uniformly negative
data reports is not going to help anything or anyone. Some optimism, albeit
produced by some math juggling, is a ray of light…and we need that at this
point in time.”
However, negativity still reigns. A 17
percent drop in housing starts occurred at the beginning of the year which
reveals the bottom is unlikely to be reached anytime soon in that sector. There
are also scant encouraging signs in the area of credit, with supply not even
close to returning to normal levels.
