Signs of a Solid Economic Recovery?

Provided By North American Title Company
Source http://www.nat.com/

What is the economic news indicating?

HOUSING STARTS - UP
April Housing starts beat market expectations, rising 5.8%. The greatest increase was in single family starts with a moderate decline in multi-family starts.

RETAIL SALES - UP
US retail sales ROSE in May for the seventh month in a row and beat market expectations. The prior two months gains were revised higher. This is the sixth straight year-on-year gain and is, following a 14 year-on-year decline. Core Retail Sales excluding and including gasoline rose. On one side consumers are deleveraging their credit cards while they increase spending despite high unemployment, sluggish income growth, and relatively tight credit.

CONSUMER SENTIMENT - UP
Consumer Sentiment also rose as did Current Conditions and Consumer Expectations. On a trend basis, sentiment has been improving since March 2009. Consumers continue to worry about weak labor markets, high foreclosures, expensive energy and tight credit conditions.

INDUSTRIAL PRODUCTION - UP
Industrial activity increased strongly in April, its ninth increase in the past 10 months. However the output level is still well below its recent cyclical peak.

EMPIRE STATE MANUFACTURING SURVEY - UP
Manufacturing activity of New York based firms ROSE in May for the tenth consecutive month. New orders slowed; Shipments grew; Unfilled Orders declined; and Inventories expanded for the third straight month following 2 years of decline, indicating that inventory liquidation has ended.

"However, because of the shape decline in factory activity in the previous 15 months, activity remains subdued. Nevertheless, factory executives are still optimistic about a continuing and strengthen recovery over the next 6 months. Manufacturing is actively participating in the cyclical expansion of the economy," says Steven A. Wood of Insight Economics, LLC.

BUSINESS INVENTORY - UP
The inventory liquidation cycle is over and modest inventory accumulation is now taking place.

CONSUMER SENTIMENT - UP
Consumer Sentiment rose as did Current Conditions and Consumer Expectations. On a trend basis, sentiment has been improving since March 2009. Consumers continue to worry about weak labor markets, high foreclosures, expensive energy and tight credit conditions.

The economy is in recovery, howbeit modestly.

THIS ECONOMY WANTS TO RECOVER

In his recent Croesus Chronicles for Forbes, Robert Lenzner outlined several economic points:
- "The bear market ended March 9, and the end of the worst recession since the 1930s, or is it the mid 1970s, is plainly in sight."



- "About $120 billion has been pulled out of global market funds since mid-March;"



- 'Yet money market assets are still equal to 50% of the S&P 500 market cap...Since 1990, money market assets have averaged about 20% of the S&P 500 market cap. This is a huge potential buying power.


While no one is certain that a new bull market has begun, we can point to some telling signs:


"Stocks broke higher on June 1 even though the yield on 30-yeard Treasuries climbed back above 4.5%...This is what the long bond yielded in August of 2008. Just before the meltdown in credit markets during the fall of 2008."



"Credit markets are healing, as spreads have fallen considerably."



"Corporations are able to raise tens of billions in the short-term debt market."



"The yield curve, the difference in yield between short-term and long-term securities, usually widens in advance of an economic recovery, and it has done so."



"Stocks also rose spectacularly despite the bankruptcy of General Motors and the continuing loss of jobs in the automobile industry. Bad news doesn't seem to be rocking the market like it did a few months ago."



"Earnings yields on equities still remain comfortably above the yield on 10-year Treasuries and should have the ability to absorb higher interest rates driven by economic recovery."



'The US manufacturing institute for Supply Management index rose to 42.8 in May, which usually signals that gross domestic is expanding rather the faltering."



'Housing, the genesis of the crisis, is showing signs of stabilization and even amelioration. Pending sales were up 6.7% in April, even if prices are still in the tank.'



'Even automobile sales improved in May to an annualized 10 million vehicle level.'



'There has also been a mini-bull market going on in commodities that has been mightier than the one for stocks. This outperformance by commodities is another leading indicator of an economy about to turn the corner.'



And lastly, "Another factor that helps the Dow is the replacement of two stocks with no earning--General Motors and Citigroup--with Travelers and Cisco."


"Looks to Croesus that this market wants to rise, deflation or inflation both be damned!"