Signs that US may be headed slowly toward recovery

April 15th, 2009 - 12:06 pm ICT by IANS  

Barack Obama Washington, April 15 (DPA) More than a year into one of the longest and deepest US recessions in living memory, there are signs that the world’s largest economy may finally be coming around.
US President Barack Obama spotted “glimmers of hope” in his latest progress report Tuesday on the US economy. Federal Reserve Chairman Ben Bernanke spoke of “tentative signs that the sharp decline in economic activity may be slowing”.

Upbeat indicators over the last month have come from a variety of sectors, including those at the very heart of the global economic crisis. Manufacturing, housing, banks, retailers and consumers have all shown some signs of life.

While US consumers and the rest of the world take heart, economists caution that it’s far too early to speak of a growing trend.

“I do agree that there are glimmers of hope, but it is only hope at this stage, and we need to see more facts,” Bart van Ark, chief economist of the New York-based Conference Board, said in an interview.

The most positive signal has been the stock market: major US indices have surged more than 20 percent since reaching 12-year lows March 9, spurring a global rally.

In the ailing financial sector, US banks including Wells Fargo & Co and Goldman Sachs Group Inc surprised investors by reporting a profit in the first quarter of 2009 and are even considering paying back emergency government loans handed out since October. Citigroup Inc and Bank of America Corp could follow suit later this week.

The US housing market, widely considered the epicentre of the global recession, has shown some indications of bottoming out. Sales of existing homes climbed 2.1 percent in February, according to the National Association of Realtors, as consumers began taking advantage of historically low mortgage rates and a dramatic plunge in prices.

The small signs of progress come in the middle of a devastating downturn that most expect will last into 2010. The economy shrank 6.3 percent in the final quarter of 2008, and economists are bracing for a similar drop in the first three months of this year.

“2009 will continue to be a difficult year,” Obama said in a wide-ranging economic speech Tuesday at Georgetown University. “The severity of this recession will cause more job loss, more foreclosures and more pain before it ends.”

More than five million jobs have been lost since the US recession began in December 2007, the sharpest drop since the end of World War II.

At this stage, raising hopes has become mostly about simply beating analysts’ dire expectations, rather than reporting a solid uptick in the economy.

The Institute for Supply Management’s factory index gained for the third consecutive month in March, though at 36.3 it still remains well below 50, the dividing line between contraction and growth in the manufacturing sector.

Investors took heart from US car figures in March that marked an increase from the previous month - yet were down on average 38 percent from March 2008 - as a sign that struggling carmakers may yet survive the downturn.

The economy remains extremely volatile: retail sales dropped 1.1 percent in March after increasing in January and February, while producer prices fell 1.2 percent, according to government figures released Tuesday.

That fragility has left Obama with a difficult balancing act. While striking a more positive tone can itself help restore confidence in the economy, sounding an upbeat note too early could easily erode the administration’s credibility.

“Uncertainty is still very high,” van Ark said. “As long as the positive signs are linked to real facts, it’s a good thing.”

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