Economic Gains "Around the Corner"

Posted by: Joe Weber on July 21

hoover.jpg It’s a poor choice of words for anyone who can boast of even a passing acquaintance with economic history. But Northern Trust economist Asha G. Bangalore, throwing Hooverism to the winds, now says economic recovery is “around the corner.”

President Herbert Hoover, of course, in 1932 infamously said “prosperity is just around the corner.” It took the country another decade or so to actually round that corner.

Nonetheless, this economic slump is showing some clear signs of ending. Bangalore, in her July 20 daily report, notes that the Conference Board’s index of leading economic indicators rose in June for at least the third straight month. The LEI climbed 0.7% in June, on top of a 1.3% rise in May and a 1.2% jump in April. And the index’s bottom appears to have occurred last December, when it plunged 3.98%.

A rise in the index generally portends a rise in economic health. On average, recovery follows a turn upward in the index by about 6.1 months. The index has risen as much as 12 months ahead of recovery, however.

“Based on history, it appears that a recovery in the latter half of 2009 is gaining support,” Bangalore says.

The index is composed of 10 key barometers. The increase in June reflects gains in seven of them, including the factory workweek, initial jobless claims, housing permits, stock prices, interest rate spreads, orders of non-defense capital goods and supplier deliveries.

Of course, the strength of the recovery and the question of whether we’ll see a so-called “double dip,” or another decline, remain as unknowns. Most prognosticators expect unemployment to rise for another few months at least, but that is typical, since employers tend to hire only when they must to meet clearly renewed demand.

The Conference Board, in its analysis of the index's turn upward, notes that the six-month change has taken the index up to 2.0%, or a positive 4.1% annual rate in the period through June. This is up "substantially" from the negative 3.1% (or negative 6.2% annnual rate) for the prior six months. But the board cautions that the strengths among the leading indicators have been "balanced" with the weaknesses in recent months.



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BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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