From Bloomberg today, two bright spots on the economic landscape:
- The Conference Board’s sentiment index climbed to 39.2, the highest level since November, from 26.9 in March, the New York- based research group said today. The gain was the biggest since November 2005.
- Home prices stabilize: A report from S&P/Case-Shiller today showed that the slide in home prices in 20 U.S. markets slowed in February for the first time since January 2007. Prices fell 18.6 percent in February from the same month last year after dropping 19 percent the previous month.
These are welcome developments. In a financial and economic world beset with bad news, these data emphasize that the dragon of recession can be slain. The programs put in place in the U.S. are beginning to take effect.
Further analysis of the Conference Board sentiment index is also illuminating. The Conference Board’s measure of present conditions rose to 23.7 from 21.9 the prior month. The gauge of expectations for the next six months surged to 49.5, the highest level since the collapse of Lehman Brothers Holdings Inc. in September of last year.
This jump in optimism is encouraging, because if and when the economic recovery begins, it must be supported by strong consumer spending. But, if consumers are pessimistic about the future, their wallets are likely to remain closed. The hunker-down syndrome is strong when the outlook is sour.
As for housing prices, recent reports show government efforts to support housing and revive lending may be starting to work. Combined purchases of new and existing houses have hovered around a 5 million annual pace since November, and sales at retailers improved in the first two months of the year.
Add to these new developments the fact that the American and many foreign equity markets are on a fairly sustained up-trend, and you get more signals that the worst may be over, and that investors and consumers are loosening their retrenchment. It looks good for an actual recovery some time this year.
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