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Sunday, 29 March 2009

First signs of recovery

After several long wintry months of economic gloom, the first green shoots of a possible recovery have finally emerged in recent weeks.

Stock markets are rallying around the world, home sales rose unexpectedly in United States and Singapore last month, and exports and manufacturing data appear to be stabilising in a number of economies, including in Singapore.


But does this mean the worst is over?

Some economists warn that the improved data is just a temporary blip before another downward dip, as in a 'W-shaped' recession. Others say it may have reached the bottom but with no glimmer of a recovery ahead, as in an 'L-shaped' path.

Still, there is some reason to cheer, at least for now. Leading indicators seem to point to a bottoming out in the world's most severe recession since the 1930s. US Treasury Secretary Timothy Geithner has unveiled a bank rescue plan that appears to have been well-received by markets. Whether this will lead to a true recovery remains to be seen, but if better news leads to improved sentiment, it could very well be the first step.




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IS RECESSION BOTTOMING OUT?

YES

'We are beginning to see signs of progress... We're also beginning to see signs of increased sales and stabilising home prices for the first time in a very long time. We'll recover...but it will take time, it will take patience.'

US President Barack Obama last Tuesday





NO

'One month does not make a recovery so we have to be careful not to react too strongly... Most of the data...appears to signal a continuing recession, at least a few more months.'

Atlanta Federal Reserve president Dennis Lockhart




YES, BUT...

'The February manufacturing data suggests that economic conditions remain soft despite some improvement. Moreover, external headwinds remain considerable, which implies that any recovery from a bottom will likely be slow, with every risk of a relapse and a W-shaped, double-dip recession.'

Citigroup economist Kit Wei Zheng

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