Did Recession Bottom Out in December?
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Amid a lot of bad economic news, there were a few positive signs suggesting that December may prove to have been the weakest month in the current recession, according to Jim Haughey, Reed Construction Data chief economist writing in his blog at Reed Construction Data.com.
Existing home sales increase in December and the inventory of existing homes for sale fell 12%, to its lowest level in two years, Haughey states. Meanwhile home prices continued their steep slide and most sales were of properties distressed in one way or another.
"How should we interpret this fact?" he asks. The data suggests both that the recession is getting worse and that the economy is finally working off the excess new home inventory that has suppressed new home building.
"It may be both the first light at the end of the tunnel as well as a reminder of the spreading financial pain among both households and business firms," he says.
The Index of Leading Indicators rose in December, as well, he notes, largely due to an increased money supply. Greater real money supply ultimately will stimulate both consumer spending and business investment, although it will take some time to gain momentum. "This too may be a light at the end of the tunnel," Haughey adds.
What about the proposed economic stimulus? "Mostly irrelevant," he says. Read Haughey's full blog entry here.