The Green Sheet Online Edition
March 22, 2010 • Issue 10:03:02
Light alleviating a dark decline
As we are all aware, the U.S. economic scene has been fairly grim for the past several years, but many expert sources say the economy is beginning an upswing, though modest it may be. If you are like us at The Green Sheet, you are keenly watching for any sign of improvement, and the economy does seem to be showing some lift in a number of places.
A slow, subtle growth seen in various markets indicates that positive activity will likely continue in months to come.
Let's observe some bright spots in several major sectors to see if we can find light at the end of what, to many, seems like a very dark, long tunnel.
Upward movement overall
In the overall economy, a three-month moving average of the Ceridian-UCLA Pulse of Commerce Index shows a 3.3 percent increase at an annualized rate. This follows a significant increase in December 2009 and a fall of the index in January 2010.
Based on real-time diesel fuel consumption data gathered from the trucking industry and tracked by Ceridian Corp., the index closely resembles the Federal Reserve Board's Industrial Production Index. The quarter-year moving average tends to be more accurate because it shows the trend of the economy over a three-month period. Business owners often use moving averages to determine long-term sales trends.
Edward Learner is the Director of the UCLA Anderson Forecast and Chief Economist for the Ceridian-UCLA Pulse of Commerce Index. He stated the following in a release published on UCLAforecast.com: "Though the January 2010 number is disappointing, the index is 3.6 percent above its January 2009 level and is similar to year-over-year pre-recession values.
"Also, the three-month moving average is 2.3 percent above the previous year's value, which is the first time that there has been a year-over-year increase since April 2008, 21 very difficult months ago."
A quarter of light
On the corporate scene, let's observe statistics gathered from the latest quarterly survey focused on the economy, straight from the Business Roundtable. The Business Roundtable is a group of about 160 conservative American companies with an aggregate workforce of 12 million and $6 trillion in aggregate revenues. These are the nation's corporate giants that do significant hiring.
The report, called the Fourth Quarter 2009 CEO Economic Outlook Survey and published on BusinessRoundtable.org, indicates these companies are now seeing a slight recovery and that capital spending will likely follow the increase in revenues.
This doesn't mean large companies will immediately start hiring again. What it does mean is that overall economic gloom and doom might soon begin to fade.
This survey was conducted among 111 CEOs who are members of the Business Roundtable. Of these, 68 percent said they expect an increase in company revenues over the next six months, and 15 percent expected their revenues would be no worse than flat.
This is a notable difference compared with the responses from a third quarter 2009 survey. In that survey, only 51 percent of CEOs expected to see a sales increase in the six months that followed, while 26 percent projected a decline in revenues.
Jobs, jobs, jobs
Using a broader spectrum, CareerBuilder.com surveyed 2,720 hiring managers for its 2010 job forecast. About 20 percent of those interviewed expect an increase in hiring this year, but according to CareerBuilder CEO Matt Ferguson, the second quarter of 2010 looks brighter than the first.
Ferguson stated, "Although 20 percent of employers plan to add headcount in 2010, up from 14 percent last year, they still remain cautious in regards to their hiring. We're headed in the right direction, but should not expect to see actual job growth until at least Q2 2010." (This quote was taken from an article by Timothy Prickett Morgan published by The Register.)
In addition, an article posted on Feb. 9, 2010, by Montgomery, Ala.-based WSFA 12 News on www.wsfa.com revealed that some industries have grown despite the poor economy. For example, this seems to be a prime time for the tech industry. Cisco Systems Inc. recently announced plans to hire up to 3,000 new employees, and Oracle Corp. indicated it intends to hire about 2,000 workers.
Dan Vivoli of Nvidia Corp. said it is "super important that we invest now, when a lot of people don't think it's a good idea. It's the right thing to do, because our customers will be more efficient, and that creates jobs and a better economy."
Business spending on software and equipment is also on the upswing, according to the latest survey by the National Association for Business Economics. In an article posted by Dave Hannon of Purchasing.com, the NABE survey results show that this type of business spending has increased by 7.2 percent. And because of this increase, NABE predicts a 3.1 percent growth in the U.S. gross domestic product (GDP).
On a smaller but maybe just as significant front, the Richmond Times Dispatch reported in late February that Morgan Lumber Co., a Charlotte County, Va., lumber company, is adding at least 25 new jobs and investing $4.2 million into operations, which will result in more work for loggers, equipment repair specialists and trucking contractors.
Now let's take a close look at two markets that have been greatly affected by the economic recession: the housing and automobile markets. Though many businesses felt the jolt of the economic downswing, these two spheres seemed to be at the center of the American media scope. Every day for a couple of years, it seemed the headlines brought more shattering news about mortgages and foreclosures, auto sales branches closing their doors et cetera.
In a notably positive article titled "The Economic Outlook, January 2010," written by Jeffrey Lacker, President of the Federal Reserve Bank of Richmond (Va.), the author predicted continued economic growth and rises in employee incomes this year.
Based on data he has gathered since last summer, Lacker said that "single-family housing starts have increased by 35 percent, and, new home sales have increased by 8 percent. And there are signs that home prices have bottomed out as well. One widely followed index of existing home prices nationwide rose a seasonally adjusted 3.9 percent from May to October."
Lacker also sees positive activity in the automotive industry. "Sales have improved steadily in the last four months," he stated. "Granted, sales are still well below the long-run trend that would be needed to keep the stock of vehicles growing in line with population.
"But, just as with housing, autos are no longer a drag on GDP growth and should make positive contributions going forward, in welcome contrast to the last two years."
So if bad news about the housing and auto markets were indicators of a poor economy, could slight improvements in those sectors be our thread of hope for better days ahead?
And how is the stock market looking these days? On March 11, CNNMoney.com reported that the Dow Jones industrial average had added 44 points (0.2 percent) that day, according to early tallies, ending at a six-month high.
More than just a few companies have seen recent stock appreciations, among them Sara Lee Corp., Perrigo Co., Lancaster Colony Corp., Zarlink Semiconductor Inc., Integrated Silicon Solutions Inc., Micrus Endovascular Corp. and Pain Therapeutics Inc.
Additionally, the U.S. Department of Commerce recently released a statement showing that the GDP grew at an annual rate of 5.9 percent for the fourth quarter of 2009. This is the fastest growth rate since 2003's third quarter!
These increases in company revenues, the housing market, employment, automobile sales, the stock market, lumber mill expansion and regional job growth reflect an economic resilience that seems to be propelling the United States toward healthier economic times.
So hold on. We might well see drastic movements in a positive direction later this year.
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