5 Positive Signs of Economic Recovery

Since the banking crisis and housing collapse, the U.S. economy has showed little significant signs of improvement. Many economists have even warned of a looming double dip recession. However, the month of September has started off with a couple of reports suggesting that the economy is still improving, although not nearly as quickly as one would hope.

Consumer Confidence

Over the summer there have been a couple of signs signaling an increase in consumer confidence. Specifically, there was a 0.4% rise in consumer spending in July. This number goes hand in hand with the 0.3% salary increase from the same month, which followed a 0.1% drop in June. Although these are relatively small increases, and consumer confidence and spending are not at an all time high, experts suggest that consumer spending accounts for nearly two-thirds of U.S. economic activity. Therefore, even slight gains are a good sign for the overall economy.

Saving Activities

During the majority of 2009, and the first few months of 2010, consumer spending was disappointing because Americans were putting more of their money into savings. At the beginning of the recession in 2008 the savings rate – or percentage of disposable income that is not spent on goods or services for individual consumption – was only at 2.7%. In June the savings rate was up to 6.2%, but it dropped to 5.9% in July. This data, along with the numbers showing increased consumer confidence suggests that spending will continue to increase with incomes.

Loan Defaults

According to the Federal Deposit Insurance Corporation, loan recovery has actually showed slight signs of improvement this summer. The total number of loans in the United States with past due amounts of 90 days or more have decreased to the lowest level in four years. Overall loan balances have also been on the decline. Some economists suggest that these improvements are a result of the Wall Street Reform bill that tightened lending laws and forced banks to cut down on risky loans. For more information on the reform legislation, check out this article I posted last month.

Divorce and Birth Rates

Another interesting gauge of the economy is the number of divorces and childbirths in the country. Getting a divorce is expensive and time consuming. Therefore some couples have been forced to hold off on filing for divorce due to financial limitations. Over the past few years divorce rates have been declining, but so far in 2010 the rates have increased. This may not seem like a significant sign of economic improvement, but it does show that unhappy couples are willing to spend more than they had been in 2009 or 2008. Additionally, the number of families who had a new child increased this year. We had seen the largest decline in births since the Great Depression as families held off on having children because of the expense. However, these numbers are finally starting to improve.

Stock Market

One of the most accurate indicators of economic strength is the stock market. Although the stock market saw a temporary slump in August, when the Standard & Poor’s 500 Index lost 4.7%, this month has been off to a good start. On the first day of September the Down Jones jumped 255 points. Many experts attribute the rise to better than expected manufacturing growth in both the U.S. and China. Other international reports also had an impact on the stock market, such as the announcement from Australia that their economy grew at the fastest pace in three years.

Three Signs that the Economy Could be Poised to Boom

Every day there are new reports predicting how long the recession will last. Some assert that unemployment rates will continue to increase and that we have not yet seen the worst of the housing market crash. However, Peter Cohan of DailyFinance has put together a great upbeat blog entry explaining three signs that the economy could be poised to boom. Check out his informative post below.

Being optimistic by nature, I like to look for good news. So, a handful of recent articles on the economy struck me as a possible harbinger of good times ahead. These reports suggest that consumers and businesses are wising up by borrowing less, living within their means, and -- in the case of a lucky handful of companies -- piling billions of cash onto their balance sheets through initial public offerings. These developments could be laying the groundwork for an economic recovery.

Since 70 percent of GDP growth comes from consumer spending, the reports that consumer spending and borrowing are down clearly suggest short-term bad news. On Oct. 7, AP reported that more people are using food stamps and that more are cooking at home instead of going out to restaurants. With 15.1 million unemployed, this doesn't come as a big surprise.

Nor does news that consumers are borrowing less. Also on Oct. 7, the Federal Reserve reported that consumer debt outstanding fell in August at a 5.8 percent annual rate by $12 billion -- $2 billion more than Wall Street economists expected. Credit-card debt fell by 13.1 percent -- which is why, without cash-for-clunkers, it's unlikely that consumer spending will continue to grow at August's 1.3 percent rise. Indeed, the National Retail Foundation thinks 2009 retail sales will fall 3 percent.

Intriguingly, while consumers are re-equitizing their balance sheets, some companies are adding billions in equity to theirs. AP reports that just yesterday, two companies raised $10 billion in the IPO market -- more than 10 times the $917 million raised in IPOs during 2008's third quarter. Both were well-established companies: Banco Santander Brasil SA pulled in $8.1 billion, while Verisk Analytics (VRSK) -- a company I consulted to in 2002 -- raised $1.9 billion from investors.

Signs the Recession Might be Nearing an End

If you are not yet sick of the word “recession,” then you have probably been living under a rock. It seems like talk of the seemingly never-ending “great recession” has been everywhere. You see it in TV commercials, you hear about it at work, and you probably at least know someone who has been directly affected by it. However, recent studies by several experts and news outlets are beginning to suggest that the worst of the recession might already be over.

There are several factors that contribute to these recent reports, but do not get too excited just yet. It is still far too early to tell if the economy is improving. Additionally, even if the U.S. economy is on the rebound, it may very likely not be back to what we consider "normal" until as late as the end of 2010, or even later.

Rising Home Sales

One of the first signs that our economy was suffering was the burst of the real estate bubble a few years ago. Since then, home values have been on a consistent decline. However, things are finally beginning to look good for the real estate industry. Between huge federal credits and record low prices, home sales are finally beginning to pickup. In the month of April, 17 different states across the country reported increase in purchases. Although sales did pick up, the nationwide average house price dropped further to only $169,000.

Many experts are predicting that we are finally seeing the bottom of the real estate burst. In fact, nearly 1 out of every 10 cities in the country actually reported an increase in home value. It may seem low, but it’s definitely a start.

Consumer Confidence

U.S. consumer confidence was at an all time low in November of 2008 due to job losses and the country’s poor economy. However, it has been slowly increasing since. In April 2009, the consumer sentiment index rose to 61.9 according to Reuters. This was up from 57.3 just one-month prior. Do not get too excited though, some experts are claiming the reports have been inflated by consumers receiving their tax refunds and families preparing for the summer.

Unemployment Rates

Earlier this month a great new report came out showing that the number of job losses last month was the lowest it had been in over 6 months. This was partially due to the huge number of government jobs that were created, as well as new tax breaks for businesses. Although the forecast for the rest of the year is not clear, any decline in job losses is definitely a step in the right direction.

Stock Market

The stock market is always considered a great economic indicator, and although there have been a lot of drops over the past 6 months, things are finally beginning to settle down. In April, the stock market actually saw the biggest growth it has had in over 9 years. Additionally, stocks rose again by around 2% in the first weeks of May.

Oil Rebounds

With more and more people looking for ways to save money, oil prices had been consistently dropping over the past year. However, in recent weeks oil prices have begun to rise again. A recent CNN study claims that the national average price of gas has increased by over 12% during the last month. Although no one wants to pay more at the pump, this is actually a good thing. Since gas is traded on a global market, the price increase shows that the world economy is also beginning to recover.

Less Pending Construction

Construction projects all over the country have been put on hold as local governments struggle to generate enough revenue. However, reports show that many cities are getting back on their feet thanks to recent tax changes and stimulus money. This creates jobs, which in turn creates more revenue, and helps the economy in general.

Lending and Loans

One of the reasons the economy has been improving lately is because of the change in lending policies. For a while it was nearly impossible for first-time homebuyers to purchase a home, between long approval processes, and difficult-to-negotiate bank properties. However, more banks are easing up on their lending policies and families are finally beginning to purchase houses again.