Reports Show Conditions Easingby Tim Manni
Several reports have been issued over the last month or so that have many market analysts optimistic about a pending economic recovery. The latest slew of improving data comes from the Institute for Supply Management’s (ISM) purchasing managers’ index, pending home sales in March, and the global senior loan officer survey. Each touches on a different segment of the economy.
The ISM’s index rose to 40.1% in April, besting economists’ estimates of an increase to 39.1%. The analysis of the ISM’s report translates into a common theme reverberating through most of the country’s economic reports: while conditions are still narrowing, they’re doing so at a far better pace. April’s increase to 40.1% is up nearly four percent from March, registering the index’s highest reading since September.
Market observers tend to view any ISM reading under 50% as contracting. As the index climbs back towards productivity, experts are quick to warn that the end of contraction doesn’t necessarily signal recovery.
Pending Home Sales Rise
Meanwhile, the National Association of Realtors said its Pending Home Sales Index increased in March for the second month in a row. The index climbed by 3.2% to 84.6 from February to March:
“That’s critical because once sales bottom, it’s only a matter of time before you work off excess inventories [said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut]. That’s the key to stabilization in the financial system and the economy at large. We’re closer to that than people thought just a few months ago.”
Global Signs of Stabilization Emerge
Considering the devastation the housing market wreaked on credit conditions, and how the U.S.’s situation seemed to go global overnight, even a slight improvement to the global senior loan officer survey is viewed as a welcoming trend. Rebecca Wilder at NewsnEconomics.com reports that:
Together, global senior loan officer surveys tell the following story: the worst of the credit crunch, at least in commercial banking, is likely behind us. Key central banks – the Bank of Canada (BoC), the Bank of England (BoE), and the European Central Bank (ECB) – report that Q1 2009 credit conditions in their respective banking sectors are generally tightening; however signs of stabilization are emerging: fewer banks are reporting to have tightened.
While these positive (less negative) reports certainly don’t indicate a recovery will happen overnight, they do signal that we’re entering a bottom to which the only way to go is up. To read more analysis on the latest market conditions, be sure to read HSH’s Weekly Market Trends Newsletter.