US Business Movement Beats Forecast. Signs of Economic Improvement.

Manufacturing

According to the Institute for Supply Management (Chicago Inc.) its business barometer increased to 50, which has been the highest level since last September, and a reading of 43.4 in July. (The dividing line between contraction and expansion is ’50’.) Economists that had been surveyed by Bloomberg News had forecast that  the index would rise to 48, according to the median of 53 projections. Estimates ranged from 46 to 52.5 and are expected to be the first sign of expansion measured since January 2008.

Robert Stein,  speaking of the auto makers increased production starting noticeably in the last month said, “…a manufacturing-led recovery… much of this (increase) is probably related to the revival in auto production over the past month or so.”  Stein is a senior economist at First Trust Advisors in Lisle, Illinois. Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. Factories at General Motors Co. and Chrysler Group LLC are resuming production after exiting bankruptcy proceedings. Also, plants have boosted output to meet demand from the government’s “cash-for-clunkers” trade-in program, which ended Aug. 24.

Durable Goods

Another sign of the improving economy: a big surge in durable goods orders in July. “There’s no question that the nearly 5% jump adds another bright spot to the unfolding picture of an economy easing out of recession. Though it will be a couple of months before third quarter gross domestic product is calculated, marking an end to the recession, it seems likely that this month will be the turning point.” said Jerome Idaszack of The Kiplinger Letter.

Real Estate and Home Sales

Sales of existing homes and now new homes have turned upward including single-family, townhomes, condominiums and co-ops. “The increased 3.6 percent to a seasonally adjusted annual rate¹ of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2 percent lower than the 4.90 million-unit level in June 2008.” Said Lawrence Yun, NAR chief economist, is hopeful about the gain. “The increase in existing-home sales occurred in all major regions of the country,” he said. “We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions. Despite the rise in closed transactions, many Realtors® are reporting lost sales as a result of new appraisal standards that went into effect May 1 of this year.”

Summary? We are still in for a roller coaster of 2009 and 2010, but we are gradually improving. Our best days are indeed ahead!

Your best days are ahead,

The Empower Team,

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