Irwin Kellner had an interesting story on the Marketwatch web site today, listing 21 reasons he believes that the recession is coming to an end. I’m not going to critique it line by line, nor do I think it’s perfect, but last fall I said I thought the recession might end by the spring, and it’s interesting to see someone else’s more reasoned opinion along the lines of your own. Here they are:

1. The Conference Board’s index of leading economic indicators has risen for two months in a row.
2. Producer prices have increased for two straight months.
3. Consumer prices rose in January — the first monthly gain in six months.
4. The Baltic Dry Index, which measures the cost of shipping key raw materials like copper, steel and iron, has more than doubled from its recent lows.
5. Existing-home sales rose in December, and participants in our weekly survey think that another rise took place in January.
6. Pending home sales went up in December.
7. Builders’ confidence inched up this month.
8. Thanks to lower interest rates, applications for both new mortgages and refinancings of existing mortgages are rising.
9. Real hourly earnings rose 4.5% in December following a 3.3% increase in November.
10. An index of consumer expectations rose in January.
11. Retail sales shot up by 1% in January — the first monthly rise since June.
12. The decline in consumer credit moderated in the latest month.
13. New orders for consumer and nonmilitary capital goods went up in January.
14. The ISM index of manufacturing went up last month.
15. The ISM index of services rose last month for the second month in a row.
16. The money supply is soaring, a sign that there’s plenty of liquidity in the economy.
17. The 3-month London interbank offered rate, a measure of banks’ willingness to lend to each other, has dropped to 1.2% from close to 5% a number of weeks ago.
18. Other measures of the state of the financial markets, like the TED spread and the 2-year swap spread are down, as well.
19. Prices of credit default swaps for banks have fallen from their peaks.
20. The corporate-bond markets are thawing out, too; some $127 billion in dollar-denominated debt was issued in January, the most for any month since last May.
21. Some securities on banks’ books are starting to recover in value.

Last fall I based my expectations for a rebound this spring on the belief that a combination of lower mortgage rates and the decline in housing prices would meet pent up demand from the credit crunch. The Case Shiller Home Price Index peaked in late ‘04, making the housing bear market in its fifth year. Maybe if we can get Obama to sound a bit more optimistic about economic prospects, we could get going.

What do you think?

Signs of life
Commentary: The economy’s worst may be past

February 24th, 2009

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