"Evidence Mounts of Strong Recovery" - Democratic Underground

Clio the Leo

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Sun Apr-18-10 06:52 PM
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"Evidence Mounts of Strong Recovery"

Evidence Mounts of Strong Recovery

By MARK WHITEHOUSE

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."

In the latest Wall Street Journal economic-forecasting survey, three out of four economists, including many of the most optimistic, said their growth forecasts over the next 18 months will more likely prove too low than too high. On average, the 56 economists in the poll expect U.S. gross domestic product, a measure of all the money spent on goods and services, to rise an inflation-adjusted 3.1% in 2010. Some nudged their estimates upward Wednesday, with Barclays Capital going to 3.8% from 3.5%.

The Dow Jones Industrial Average rallied Wednesday, rising 0.94% to close at 11123.11, after the retail-sales report came out. The Commerce Department said consumers spent a seasonally adjusted $363 billion in March, up 1.6% from the previous month and 7.6% from a year earlier, not adjusted for inflation. The annual rise, aided by better weather and an early Easter holiday, was the largest since July 2005.

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Since the economy turned toward growth in mid-2009, economists have offered a litany of reasons that the recovery should be exceedingly sluggish. Heavy debt burdens would weigh on consumer spending, wounded banks would pull back on lending, and a glut of foreclosed homes would keep house prices and construction activity down.

Many of those factors are still in play—and even the most optimistic estimates of U.S. growth remain well below the 7% to 8% level seen in the wake of previous deep recessions. Bank lending has been shrinking at the fastest rate in more than six decades, the supply of foreclosed homes turned up in early 2010 and construction activity remains subdued.

What's different, though, is that those headwinds aren't holding back U.S. consumers. Economists now expect inflation-adjusted consumer spending to grow at an annualized rate of more than 3% in the first quarter, up from earlier estimates of less than 2%. As consumers shed an increasing amount of debt through defaults, and as the government implements new incentives for banks to forgive mortgage principal, the added relief could help keep the spending going.

http://online.wsj.com/article/SB10001424052702304798204575183683432202678.html?mod=wsj_share_twitter

I work in retail. Last month was our strongest March in 8 years. (and I'm POOPED!)