Once again the economic data we received this week fails to support what some believe is an inevitable double-dip.
In the last five days we have learned:
- Housing starts rose 15 percent, to a seasonally adjusted rate of 658,000. That was considerably higher that the 590,000 unit rate that was forecast.
- The leading economic indicators for the U.S. rose 0.2% in September marking the 5th straight month of gains.
- The Philadelphia Fed index of manufacturing activity rebounded to 8.7 in October from negative 17.5 in September.
- The 4-week moving average of initial jobless claims fell to its lowest level since last Spring.
- Industrial production in the U.S. advanced in 0.2% in September on growing demand for automobiles and computers after stalling the prior month, a sign manufacturers are contributing to growth.
- The Labor Department also said today that unemployment rates dropped in 25 states, rose in 14 and stayed the same in 11. That’s an improvement from August, when unemployment rose in 26 states.
- Capacity utilization, which measures the amount of a plant that is in use, increased to 77.4 percent from 77.3 percent in August. That is actually inching closer to the 20 year average of 79.4% and 10% percentage points off of the 2009 bottom. Take a look:
All of these items are consistent with what the Fed also revealed earlier…
From the Fed’s Beige Book:
“Reports from the twelve Federal Reserve Districts indicate that overall economic activity continued to expand in September, although many Districts described the pace of growth as “modest” or “slight” and contacts generally noted weaker or less certain outlooks for business conditions. The reports suggest that consumer spending was up slightly in most Districts, with auto sales and tourism leading the way in several of them. Business spending increased somewhat, particularly for construction and mining equipment and auto dealer inventories, but many Districts noted restraint in hiring and capital spending plans.”
“Consumer spending was up slightly in September. The majority of Districts reported increases in auto sales, with the largest improvements in San Francisco and New York.”
“Contacts indicated that manufacturing and transportation activity increased since the last report in most Districts. A large number of Districts reported higher production of autos and other transportation-related equipment. Cleveland, Atlanta, and Chicago noted increases in auto production, and Boston, Richmond, Chicago, and St. Louis all cited robust activity for auto suppliers. Dallas reported healthy demand for nondefense transportation goods. Boston, Richmond, Kansas City, and San Francisco indicated continued growth in commercial aviation and aerospace manufacturing. Steel production rose in Cleveland and Chicago, and in a number of Districts metal manufacturers’ new orders also rose.”
Taken together, all of these are signs that the economy is growing. It is sluggish without question, but it tells us that the double-dip predictions at this point are completely overdone.
It’s one of the reasons why the DOW is up over 1300 points off of the earlier lows. The other is earnings which by and large have been pretty good so far.
The bears are wrong about the recession. It is not 2008.
By the way, today’s has rally pushed the Dow and the S&P higher for the week. If it holds, it will be the first three-week winning streak in eight months.
The good news is, simply based on seasonality, November and December are the best months of the year.
Somewhere along the road to financial freedom…
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