Wednesday, March 10, 2010

Sunny Days Ahead For Our Economy?

Trying to figure out where our economy is headed in the coming months? Should you listen to the Federal Reserve? Focus on the latest pending home sales numbers?

Both is a good answer, but here's a fact: The Fed's "Beige Book" report -- based on economic data from each of its 12 regional member banks -- found positive signs in 9 of the 12 regions it covered.

Despite bad weather in January and February in large portions of the country, the Fed's regional banks found consumer spending and manufacturing output increasing.

Both are key indicators of improving economic conditions ahead, especially consumer spending, which accounts for 70 percent of U.S. economic activity and directly affects employment growth.

According to a separate report issued by the Commerce Department last week, consumer spending increased by one half of one percent in January - outpacing income growth for four straight months.

What does that mean? Consumers are coming out of their shells, regaining confidence, and beginning to feel good again about buying more goods and services.

The National Association of Realtors, which I'm a member of, reported last week that the weather that paralyzed entire sections of the country also put a damper on home shopping last month bringing down pending home sales by 7.6 percent.

Nonetheless, pending home sales that have not yet gone to closing still came in 12 percent higher in January than they were the year before. In addition they are likely to bounce back strongly in the next couple of months as buyers rush to sign contracts to qualify for the expiring home purchase tax credits.

Home prices nationally are also showing hints of improvement. According to the latest Clear Capital price index, which is based on information from thousands of neighborhoods prices rose by 5 percent on average for the most recent quarter on a year-over-year basis.

Of course this is being helped along by continuing favorable financing conditions in the mortgage markets. Applications for new mortgages to purchase houses in the coming several months were up by 12 percent last week, according to the Mortgage Bankers Association.

All this to say maybe the spring sun will shine on our economy too!

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