Editor's Plate: Great Recession Shows Signs of Decline
The Great Recession is not being replaced by the Great Recovery, but
celebrate the victories and do your part to keep this momentum rolling.
I just returned from the second of two food industry shows in October. While neither show was a smashing success, attendance at each was OK; most people were using the expression “better than expected.”
More telling, I hope, were the casual conversations I had with executives of the exhibiting companies. Even the normally upbeat ones (read that as: the ones who will BS me) over the past year had talked of ups and downs, with more of the latter. But this time, many of them said their companies had strung together their first two or three consecutive months of sales growth. Some said the third quarter was actually pretty good. While business was not booming, and they hadn’t returned to 2007 levels of activity, they felt they were seeing signs that the Great Recession is over.
On the other hand, I’m still getting phone calls like this one: “Yes, we’ve been selling left-handed monkey wrenches for the auto industry for decades, but we want to profess our capabilities for the food & beverage industry.”
Add a large grain of salt there, but the message also is that not all sectors of the economy are faring well. And while few in the food industry have been dancing a jig the past few months, it is remarkable how suppliers to other industries look to the food & beverage industry as a port in the storm.
The Conference Board’s Leading Economic Index (LEI) for the U.S. increased 1.0 percent in September, following a 0.4 percent gain in August, and a 1.0 percent rise in July. The September score of 103.5 was the highest score since October of 2007, a month or two before when most economists think the recession began.
“The LEI has risen for six consecutive months and the coincident economic index has increased in two of the last three months. These numbers strongly suggest that a recovery is developing,” says Ken Goldstein, economist at The Conference Board. “However, the intensity of that recovery will depend on how much, and how soon, demand picks up.”
Economists are forecasting that the gross domestic product, the broadest measure of the country’s economic activity, rose at an annual rate of 3.2 percent in the third quarter. If they’re right, it will end a streak of four quarters of the most severe U.S. economic decline since the Great Depression.
But while there is a growing consensus that Great Recession ended at some point earlier this year, some economists think that one quarter of solid economic growth does not indicate that a Great Recovery has begun. Unemployment continues to rise, and about 30 percent of factory capacity remains idle.
But another report finds consumers around the world expressing more confidence about their personal financial situations. The most recent Nielsen Global Consumer Confidence Index jumped 9 points from 77 index points in April to 86 in October. Brazil, Hong Kong and South Korea recorded double-digit boosts in confidence, while the U.S. recorded its first increase in consumer confidence since early 2007. But even though most consumers are feeling better about the economy, they remain cautious about spending their money.
“A nine-point surge in consumer confidence signifies a welcome return to positive territory,” says James Russo, vice president of global consumer insights at Nielsen. “It really demonstrates that in the last six months, a majority of consumer sentiment across the globe has shifted gears from recession to recovery – the tide has turned.”
To be fair, The Conference Board’s Consumer Confidence Index, which focuses only on the U.S., went south in October, after strong increases in April and May and then another uptick in August.
But the Dow Jones Industrial Average closed above 10,000 five times during October. Those would be first times the Dow closed above 10,000 since Oct. 3, 2008.
Did you get your third-quarter 401(k) statement? Seeing a 16 percent gain in just three months – and 30 percent for the year – has got to buoy some spirits. It certainly did mine. I just hope the fourth quarter statement doesn’t take back any of those gains.
So while we still have a ways to go, there are many signs the worst is over and the recovery has begun. As I’ve said in this column in the past, attitude plays a significant role in all this. In your year-end meetings, speak with optimism, plan for growth and budget for a better 2010.