Pages Menu
Categories Menu

Posted by on Aug 28, 2009 in Economy | 24 comments

Is The Economy Looking Up?

Three indicators suggest the answer may be yes.

First, orders for durable goods jumped 4.5 percent from June to July, the largest gain in two years.

Durable goods orders are what economists call a leading indicator for manufacturing. If you’re familiar with project management, they are akin to a dependency in that they have to be in place for manufacturers to run production lines. A durable good is defined as one with a lifespan of three or more years. Some durable goods are really big, expensive and, well, durable, like airplanes.

AngryBear notes that this jump includes a lot of commercial airplane orders. When civilian aircraft orders are excluded, the increase is a more moderate 1.9% month to month. But even a moderate increase is noteworthy, beause durable goods orders have trended down since March 2008; in June, they dropped 1.3%.

The economy isn’t ready to embark on a marathon, however. CNN reports that “compared to the same period last year, new orders were still down 25.8%.”

The second positive note relates to housing. The S&P/Case-Shiller U.S. National Home Price Index indicates average home prices are up 3%. This is the “first quarter-to-quarter increase in three years.” If housing prices have indeed hit bottom, then the economy is on its way to recovery.

The final note relates to consumer confidence, which seems to be up. Consumer outlook is at its most optimistic since December 2007, according to the Conference Board, which has been charting confidence for four decades. Gallup, however, has survey data moving in the opposite direction, while ABC survey data show confidence is up. Economics is called the dismal science for a reason!

What do you think? Up or down or flat?

This article first appeared at Newsvine