Finally...signs of life
In an article from http://www.economist.com/displayStory.cfm?story_id=13411349 the author states how this recession is likely bottoming, but a full recovery will likely take some time. Over the last month, we've seen more and more positive economic reports, in contrast to three months ago where positive news was nowhere in sight. National home prices are now considered 10% undervalued relative to income, and this is leading buyers back into the market. Auto sales recently saw an 8% jump from February to March, creating a glimmer of hope in a dismal market. Larry Summers recently said that the current annualised vehicle sales of 9 million are well below the 14 million needed for replacement and rising population. Larry continued to say that the current level of the stock market might be the 'sale of the century.' Investors certainly have known how cheap stocks and houses have become, but with the good news we're seeing people are starting to buy once again. Despite all this good news, certain parts of the economy are likely to take longer to recover. Consumer spending in general will continue to be depressed by the 18% drop in household net worth last year. More job losses are inevitable as unemployment is a lagging indicator. These job losses are likely to lead to more defaults on loans, thus causing more problems for an already battered financial system. The Federal Reserve should counter this by continuing to buy the bad assets, as an economic recovery isn't likely without the financial industry on board. It will take macro economists months to call March 2009 the trough, but I think the evidence exists to already label it as such. The lagging indicators will certainly take a while to get better, but the leading indicators (such as the stock market) are pointing to a recovery.