Split opinions on economy may be good
There is confusion about where we are in the business cycle. While there are signs the credit markets may be thawing, corporate CEOs are feeling gloomy. What do the mixed signals tell us? Amy Scott reports.
A pedestrian walks past a furniture store that is having a closing down sale in Los Angeles. (Mark Ralston/AFP/Getty Images)
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Kai Ryssdal: We've mentioned more than once on this program that consumer spending accounts for something near 70 percent of the entire economy. So how we're all collectively feeling about things is far from a trivial question. And with that in mind, I offer these data points. The International Monetary Fund is about to slap a new price tag on all those bad bank debts. The total could reach $4 trillion this year. There was a major survey out today showing corporate CEOs are as glum about the future as they have been since people started keeping track.
And yet, there's a certain sense out there -- validated by a New York Times/CBS News poll out today -- that things are starting to turn around. As we try to figure out what to make of all these mixed signals, Marketplace's Amy Scott reports the confusion might actually be a good thing.
AMY SCOTT: These days a glance at the business pages can give you a sort of mental whiplash. Take this sampling of headlines. "Muted Signs of Life in the Credit Markets." Great. Then again, "After Recession, Recovery Will Take Years." But hold on, "Outlook on Economy is Brightening, New Poll Finds."
Lakshman Achuthan: Confusion, right? There's a lot of confusion as to where we are in the business cycle.
Lakshman Achuthan studies recessions and recoveries at the Economic Cycle Research Institute. He says confusion is common at turning points in the economy. And he thinks we're close. Yes, the big numbers, like jobs and foreclosures are still depressing. But he's encouraged by indicators that predict future growth. Like factory orders. As well as more exotic data.
ACHUTHAN: Things that aren't even traded, like tallow, which ends up being used as soap to clean dirty factories. And the way that factories get dirty is they get used. So if we see factory soap sales firming, we know something's happening.
That's right, your best gauge of the economy's health could be the price of rendered beef fat, which has been rising since December by the way. It's going to take more than that to convince Pierre Ellis. He's a forecaster with Decision Economics. He's says the credit market might be thawing. And demand for houses may be picking up. But he's not ready to call a rebound.
PIERRE ELLIS: If you want to be optimistic, you can see some of those signs. Trouble is, things can easily turn for the worse again.
If Ellis sounds like he's hedging, you can hardly blame him. As with the recession, we probably won't know we're in a recovery until it's well underway.
In New York, I'm Amy Scott for Marketplace.
Comments
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From SC, 04/08/2009
I worked in a factory for a little over a year and Mr. Luther Davis is right additional cleaning supplies for factories is not a good sign. That usually is what is known as "busy-work", work that keeps you busy or, the factory is getting ready to close in which case they must be cleaned to a certain standard. So, tallow sales could mean a lot of factories are about to close more than those that have already closed which would cause tallow sales to go up.
From brooklyn, NY, 04/07/2009
Achuthan must not have spent part of his career on the factory floor. Major clean-ups, such as is sighted in the use of tallow, are done during slow times to retain staff. When factories are busy clean-up is put off. When there isn't enough work for everybody that's when things get a major cleaning and painting. I've run a print shop for the last decade and it's looking pretty clean.
From Hoboken, NJ, 04/07/2009
Bring on the tallow! Thanks for bringing in a new perspective. I really mean that :-)
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