This came to me in a e-mail, and as the optimist that I am, I have decided to share this with more than just those of you who have signed up for this newsletter. I think these are all very true and valid points. If you think about it a recession is not horrible, it is an opportunity for correction and change. The key is to make sure that the change is for the better. Some people pulled out of the stock market and stuffed their mattresses. Others of us stayed in and bought low once more. You can’t recover if you don’t stay invested.
So here it is. See if you too don’t believe in the positive message this brings forward.
2. Global economies are recovering. The Organisation for Economic Co-operation and Development’s (OECD) composite leading indicators for its member countries recorded their largest increase in June since records began in 1962. For the first time ever, all 33 countries recorded an increase. Japan’s economy grew this past quarter for the first time since early last year. Europe also appears to be pulling out of recession, with positive growth reported in the most recent quarters in Germany and France.
3. The job market is improving. Non-farm payrolls fell by just 247,000 in June, while the unemployment rate eased from 9.5% to 9.4%. The rate of decline in payrolls has been improving since January, when payrolls declined by 741,000. Employment has been a lagging indicator of the economy, improving at the end of or well after every recession in the postwar period.
4. The Federal Reserve’s efforts to stabilize the financial system worked. The massive efforts to slash interest rates and provide trillions in funds to the financial system have succeeded in restoring conditions in the money and corporate credit markets. Corporate America has taken advantage of attractive rates to refinance old debt and fund new acquisitions. Companies issued more than $800 billion in new bonds during the first seven months of 2009 – nearly a third more than a year earlier. In the money markets, the three-month London interbank offered rate is down to 0.43%, less than one-tenth of where this short-term benchmark stood at the worst of the credit crisis last October.
5. Bank lending is increasing. Banks’ profitability and capitalization have improved, and banks have started lending again. According to the Fed’s recent periodic survey of banks, about 30% said, on net, they tightened lending to businesses in May, June and July, but that’s down from roughly 40% in April’s survey. The percentage of banks that tightened standards on commercial real estate loans dropped 20 percentage points to 45%. For residential real estate, the percentage fell to 20% from a peak of about 75% a year ago. Most banks expected lending standards across all loans would remain tighter than their average levels over the past decade until at least the second half of 2010. However, the improvement in bank lending should be enough to support economic recovery.
6. Expectations for 2010 economic growth continue to improve. In a recent Wall Street Journal survey, 80% of economists said they believe the recession either has ended or will end by September. In addition, economists continue to upgrade expectations for growth in the rest of 2009 and beyond. The top 50 U.S. economists* expect the economy to grow 2.2% in the third quarter, after falling just 1% in the second quarter. Economists in August lifted their projection for third-quarter growth by 1.2 percentage points over July’s estimate to 2.2%, according to the median of 55 forecasts in a Bloomberg News survey. That is the biggest such boost in surveys dating from May 2003. Forecasts for 2010 were raised to 2.3% from 2.1%. The International Monetary Fund said in a recently revised forecast that the world economy will expand 2.5% in 2010, compared with its April projection of 1.9%.
7. Housing has bottomed. Sales of existing U.S. homes jumped more than expected in July to the highest level in almost two years, signaling the worst of the housing recession may have passed. Purchases climbed 7.2% to a 5.24 million annual rate, the most since August 2007, the National Association of Realtors said recently. The gain was the biggest since records began in 1999. The S&P/Case-Shiller home price index advanced 2.9% in the second quarter from the previous three months, the first increase since 2006 and the biggest in almost four years. Foreclosure-driven declines in prices, government credits for first-time buyers and near-record-low borrowing costs are expected to continue stoking demand.
8. Manufacturing is on the rebound. The Fed said industrial production rose 0.5% in July, the first increase in nine months. European industrial orders increased 3.1% from May, the biggest gain in 19 months, according to the European Union’s statistics office.
To give credit where credit is due, and to find out more go to the following link: http://www.edwardjones.com/ecmweb/groups/ejw_content/