Looks like bright times ahead
Our colleagues at The Wall Street Journal join a growing voice pointing to a strong economic recovery. On today’s front page, Mark Whitehouse details evidence that the recovery could occur faster than anticipated.
Shoppers turned up in surprising force at U.S. stores, auto dealers, restaurants and elsewhere in March, adding to a growing sense that the recovery could prove faster than anticipated.
Combined with a rebounding service sector, rising financial markets and new efforts to forgive mortgage debts, March’s 1.6% surge in retail sales is tempting forecasters to upgrade their assessments of the economy’s ability to restore the 8.2 million U.S. jobs lost since the recession began.
The renewed consumer and business activity also helped propel J.P. Morgan Chase & Co. to a 55% profit gain in the first quarter, increasing optimism among investors that banks, too, are rebounding from the crisis that floored the industry.
“There’s a growing risk that we’re underestimating the strength of the recovery,” said Stephen Stanley, chief economist at Pierpont Securities, noting that deep recessions tend to be followed by steeper recoveries. “If the economy pops, it’s going to be faster than anyone is forecasting.”
He also points to a recent WSJ economic-forecasting survey, which showed three out of four economists expect their growth forecasts over the next year and a half will prove to be too low rather than too high.
It appears consumers are willing to open their purse strings more than previously expected. Whether this action is sustainable remains in question, especially with the unemployment rate perched at 9.7%.
But as the stock market keeps hitting fresh highs, and as stories keep circulating describing the strength of the rebounding economy, Miller Tabak equity strategist Peter Boockvar asks the question on everyone’s mind: is this recovery real or not?
“I can’t keep but wondering how much of the improvement in all of the above is due to zero nominal and negative real interest rates and how much is due to the natural order of the economic cycle,” he says. “There is no question it is a combination of both but is a zero interest rate environment a proper gauge of what’s real and what’s artificial, what’s organic growth and what’s juiced by easy money all over again.”
Only time will tell, especially when the economy “has to be left on its own without the crutch of cheap money.”
Chart courtesy of WSJ.
(Photo credit: Wikipedia Commons)