In early March we posted on signs the economy may be hitting bottom. Since then new data is showing that the economy may be in recovery mode:
1. First quarter consumer spending was weak, but not as weak as Q4 2008. While it is unlikely to pick up until later this year, this is still a good sign.
2. Inventories are contracting at a historically rapid pace. Wholesale inventories in February dropped by 1.5%, the largest monthly drop since the data has been recorded. This follows a .9% drop in January. Decreases in inventory levels means, eventually, restock orders.
3. Auto sales are below the scrap rate at about 9 million units per year (U.S.). Like other retail sectors, auto sales are starting to show signs of life.
5. The stimulus package hasn't kicked in yet. The economy likely won't start feel the impacts of the fiscal stimulation efforts until at least the 3rd quarter.
Don't get me wrong - it's still ugly out there. Like many, we think unemployment will continue to rise and exceed 10% by the end of the year.
But there are lots of signs that the worst may be over and economic growth will start again later this year or early next year.