Early Morning Rise on Wall Street as a result of some Encouraging Economic News….
Andover, Massachusetts August 17th, 2010 – After a rush of increasingly dire economic data over the past few weeks, the markets opened up higher this morning as new data indicates that the Doom Scenario being forecasted by many economists and politicians might be a bit premature. The data released this morning covers everything from industrial output to housing and stock prices. But is this data enough to inject the market with confidence and prevent a double dip recession? I’m not sure and it seems as if even most experts really don’t know where we are headed, which is not doing anything to raise the confidence of average Americans fighting to stay afloat.
A consistent worry over the past few weeks has been the threat of deflation or long term inflation. Wholesale prices had not risen since March until last month when they increased by .2%. This is very good news for the economy as it momentarily eases the threat of deflation which could dramatically impact and hurt the US economy. Economists had predicted a .1% rise so this greater than expected jump is a big reason why the stock markets opened so positively today. Another area of the economy that grew in July was industrial production. The nations factories, mines and utilities have seen little to no growth in output over the past 6 months and today’s announcement that industrial output grew by 1% was very encouraging as it is double the estimated growth. This growth indicates that while domestic demand remains weak the export sector of our economy is ramping up as demand in other parts of the world supports and in some cases replaces domestic and European demand for industrial goods.
Meanwhile, home sales and construction data continues to be up and down. New home and apartment construction grew by 1.7% in July but permits for future buildings dropped by 3.1%. This drop in future activity indicates that the housing market still has a long way to go before it is out of the danger zone. Home building has suffered considerably since the end of the home buyer tax credit in April so even though the long term picture remains bleak the short term increase was positive news for the markets.
The news coming out of Wall Street and Washington continues to be up and down every week. Not a week goes by without some positive news coming out followed a few days later by a spate of negative data. This is part of the reason why consumers, economists, and Washington continue to be pessimistic about the state of the economy. While the threat of a double dip recession is certainly weaker than it was even a few weeks ago, the lack of consistently positive data means that we are still a long way away from returning to our pre recession economic levels.
Readers, what’s your opinion on where our economy is headed? Can politicians do anything more or should we just let the market works its way out of this mess?
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