Some economic indicators turn up
Three leading purchasing indices provide early indications that recovery may have started.
By Dave Hannon -- Purchasing, 2/24/2009 11:33:00 AM
While much of the data about the U.S. economy shows little cause for optimism, at least three leading economic indicators have trended up in the past two months, providing early signs that the economy may have hit bottom.
Most notably, Purchasingdata.com’s Business Conditions Index has trended up for the past two months. The index, which is based on a broad survey of purchasing managers and procurement executives, hit a low of 23.9 in December but has since increased to 26.2 in January and 27.9 in February. As a diffusion index, the reading of 27.9 still indicates that business conditions are far from growing (growth is indicated when the index passes 50), but the trend is providing some possible indications that buyers think business is improving slightly.
Also of note, Purchasingdata.com's Buying Plans Index has also risen steadily since December from 25.3 to 28.7 in the latest survey this month. This indicates that buyers are planning to increase orders after a long decline in buying plans dating back to January 2008.
The other major purchasing index from the Institute of Supply Management has
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also trended up in its most recent reading for January. After hitting a low of 32.9 in December, ISM’s Purchasing Managers’ Index (PMI) ticked up nearly 3% to 35.6 in January. As with Purchasingdata.com’s index, the ISM data shows the economy is far from growth, but has perhaps hit bottom and is beginning the long climb back up towards growth. Also trending up was ISM’s index for new orders, which jumped more than 10% in January, and its production index which saw increased nearly 6%, indicating that buyers may be ready to increase orders again after burning through high inventories.
In terms of broader economic indicators, the Conference Board’s Leading Economic Index has increased very slightly for two straight months. After ticking up 0.2% in December, the index doubled that increase to 0.4% in January, prompting ken Goldstein, economist at the Conference Board to say, “The economy has been in recession for over a year, but the level of intensity may begin to ease over the next few months. The second half of 2009 may see a period of anemic growth.”
Goldstein went on to say “robust growth” may not come until 2010. And in remarks to the Senate Banking Comittee recently, Ben Bernanke, chairman of the Federal Reserve, said the recession should end this year and 2010 "will be a year of recovery," if actions taken by the government lead to some stabilization in financial markets.
As Purchasing.com reported yesterday, the National Association for Business Economics forecasted recently that economic recovery will begin in the second half of this year. “NABE forecasters expect real GDP to rise at a sub-par 1.6% rate in the second half,” said NABE President Chris Varvares in a statement.
WHAT DO YOU THINK?
Are these indicators a sign that the economy has hit bottom and is ready to work its way back up? Post your comments here.
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