More Economic Markers Pointing to Recovery

“Green shoots”, “glimmer of hope” and “light at the end of the tunnel” are three phrases economists have recently started bandying around, referring to a slowing in the deterioration of a number of economic variables, i.e. that the rate of global economic deterioration is bottoming out. This is also referred to as the so-called second derivative of growth turning positive; continuing economic contraction is the first, negative, derivative.

These claims were validated by Goldman Sachs’s Diffusion Index (a composite of 34 economic data points from across the globe) that increased to above 50 in February and March, indicating improvement.

The results of two surveys released over the past two days also seem to back up the “green shoots” claims.

Firstly, the ZEW Indicator of Economic Sentiment for Germany, considering the outlook six months hence, improved again in April to 13.0 from -3.5 in March. This was the sixth monthly gain and the first time the index has turned positive since July 2007. “Investors are growing confident that the worst of the financial crisis and recession has passed,” said Moody’s Economy.com. This ZEW Indicator has not been a bad leading indicator in the past.

Secondly, in its latest Survey of Business Confidence of the World Moody’s Economy.com reports that global business “has taken on a slightly better hue in recent weeks”. The Survey highlights that “broad assessments of current and prospective conditions have moved up measurably since the beginning of the year. It is premature to conclude that businesses are turning measurably more upbeat, but recent survey results are somewhat encouraging.”

More signals are required, but it would seem that some measures have started pointing in the direction of an economic recovery. However, the big question mark remains the magnitude and duration of the recovery.

Comments

[wildfirexx:]

I wouldn't count all your chickens before they hatch...market indicators are good signals during normal market fluctuations. However these days are anything but normal. I think the unemployment figures will give a much better picture of reality.

Apr 22 07:28 AM

[Fabien Hug:]

Sentiment indicators may just show a tiredness for negativism. After a year plus of gloom, I think that we need to believe that better times are ahead of us. However, IMF is not very optimistic and re-leveraging may be the worst thing to do.

Apr 22 09:06 AM

[TWOfold:]

LOL! Thin gruel for optimists right now.

Apr 22 09:06 AM

[Alphameister:]

Thin gruel indeed if taken alone, but these are only two among a host of LEADING indicators conveying the same message (unemployment is a LAGGING indicator).

Apr 22 11:00 AM

[dodanimal:]

we are a long way from being out of the woods. There are still massive commercial RE and Alt-A losses yet to come.

Also, what new bubble is going to fuel growth? Its been a long long time since the US economy relied on anything but bubble manias for economic growth. There is no new housing bubble, and housing prices are still in decline.

Apr 22 11:05 AM

[dodanimal:]

Gee, I wonder if these "leading indicators" include stock prices and investor sentiment surveys?

This is just the kind of fluff "analysis" that sucker bulls use to justify buying stocks at the top of a rally, after the SP500 has rallied an amazing 30% or whatever.

I am selling stocks right now that I bought the week of march 9, and shorting the banks and retailers.

Apr 22 11:10 AM

[JLarkin:]

This is most likely a sucker's rally. According to Roubinin, IMF, etc. there are 4 Trillion in toxic losses to be written down before it's over. Banks have acknowledged less than 1 T. Foreclosures are rising, commercial real estate is the next shoe to drop on the head of the banks (especially regional), consumers are not spending, fearing layoffs, and our GDP is 70% consumption. Credit card charge offs are rising into double digits now. Maybe after BAC and C are taken over and restructured we will have cause for optimism.

Apr 22 03:33 PM

[Fred Voetsch:]

You've gotta be kidding me? Was this written by Larry Kudlow?

Apr 22 03:36 PM

[Allan Frain:]

"These claims were validated by Goldman Sachs’s Diffusion Index (a composite of 34 economic data points from across the globe) that increased to above 50 in February and March, indicating improvement."

This would be the same Goldman Sachs who reported surprizing and widely doubted earnings simultaneous with a shares offering ? If one cannot trust their earnings statement how can one trust their "Diffusion Index of 34 data points from across the globe" ? Fudging this to an agenda would be a simple matter and likely even legal.

Apr 22 03:39 PM

[TimH:]

Cretin, could you please stop spamming all your non-sense craps? It is quite annoying to see your horrendous picture and stupid comments every time when reading other people's comments.


On Apr 22 11:43 AM Cetin Hakimoglu wrote:

> But the market will rally anyway because job loss just not a big
> deal anymore. Emerging markets ETFs are surging. EWZ & FXI. We
> shoudn't dwell on lagging employment indicators.

Apr 22 05:08 PM

[Erick Tippett:]

Sir:
Have you with all your encouraging charts and quotations considered the unkown undelevereged monies floating around in the bottomless pit of world wide debt? Or perhaps that factor is not considered important or consequential in your view?

EDT
Chicago, Illinois

Apr 23 02:30 AM

[mrmillergd:]

<<<<yawn&g...

It's like saying a car has to slow down before it stops.

Apr 23 08:10 AM