- Manufacturing – Factory orders continue to grow, as the ISM Manufacturing Index is now up nine straight months to 60.4 in April. According to Mark Zandy, Chief Economist at Moody’s Analytics, “Manufacturing is leading the way for the economy.” How can this be? *Institute for Supply Management
- Inventories – One of the reasons we were so confident in the economic recovery last year was wholesale inventories, which bottomed at historic lows in December before starting to grow in January & February. However, sales have been rising for 11 months through February, creating considerable demand for continued growth in manufacturing and jobs. * U.S. Commerce Department
- Unemployment – As we suggested last quarter, job growth has resumed, with 162,000 jobs added in March. This makes the third month out of the last five to experience job growth. The unemployment rate is down to 9.7% and we expect this to continue to improve throughout the year. But due to the number of people still out of work, it will likely be at least 2-3 years before this number drops to 6%. *Based on data from US Bureau of Labor & Statistics
- Leading Indicators – an index of leading economic indicators rose 1.4% in March, now up for 12 straight months. This strongly suggests continued growth in the economy for the next 3-6 months. *The Conference Board
- Economy – GDP growth for the fourth quarter of 2009 was 5.6% and initial results for the first quarter show continued growth of 3.2%. It is becoming increasingly difficult to deny the recession is over, but many are still trying.
- Healing in the Financial System – Healing has continued as many banks are reporting strong earnings, despite the continued high level of foreclosures. Many have also been writing-up the value of assets that were written-down last year, just as we expected. Full healing will still take several years, so we expect the Fed to keep short-term rates low for the next year or two, although increases are likely in the next quarter or two.
- Inflation – Inflation continues to be tame, as we expected, with the Consumer Price Index only rising .01% on average from January to March. If inflation becomes a serious issue, it won’t likely be for 2-3 years. Refer to our 2nd Qtr. 2009 Review for a more detailed discussion. *U.S. Bureau of Labor Statistics
- Housing – With foreclosures still at record highs (RealtyTrac Inc.) and home construction still abysmally low (U.S. Commerce Department), many are still pessimistic on housing. However, according to Case-Shiller, home prices nationwide have stabilized and are rising, although there are still pockets of extreme weakness. Home sales have also increased more than expected (National Association of Realtors), probably due to government incentives. Altogether, we expect continued stabilization and recovery in housing, but at a very slow rate.
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