Modest-but-steady pace of growth indicates an end to recession; some sectors may lag
THE first robins of a more-vigorous recovery are hopping on the economic lawn of the United States.
The latest statistics have stirred hopes among economists:
* The Commerce Department's leading indicators, designed to predict turns in the economy, rose 0.9 percent in January after two straight monthly declines.
* A February survey of purchasing executives at more than 300 manufacturing companies found a surge in orders for new business. Production levels at these companies also rose sharply in February, according to the National Association of Purchasing Management's monthly survey. The Commerce Department noted Wednesday that orders to US factories rose 0.4 percent in January.
* Sales of new homes soared 12.9 percent in January, the steepest gain in a year, though sales of existing homes declined 1.5 percent.
* Spending on residential, nonresidential, and government construction projects jumped 1.3 percent in January.
* Retail sales rose 0.6 percent in January. Auto sales in the first 20 days of February were the strongest since last July.
* The nation's money supply has been growing more rapidly in recent months, giving the economy more fuel to expand.
* Stock prices are reaching new highs. Despite all the talk of a credit crunch, the financial markets raised a total of $512 billion in new money last year, of which $55 billion was in equity (new corporate shares). Modest pace of recovery
"We are over the correction," concludes David Hale, chief economist of Kemper Financial Services Inc. in Chicago. Like most economists, however, Mr. Hale anticipates a modest recovery pace compared with the early stages of previous economic expansions.
At economic turning points, the view is usually blurred by mixed statistical signals. For example, most economists expect the civilian unemployment rate, when the February figure is reported by the Bureau of Labor Statistics today, to show a rise to 7.2 percent from 7.1 percent a month earlier.
Companies are still announcing staff reductions. Digital Equipment Corporation announced this week it will offer early retirement to 7,000 employees in addition to previously announced reductions. Consumers increased their spending in January a lackluster 0.2 percent and their incomes actually fell by 0.1 percent. Industrial production fell 0.9 percent in January.