Friday, November 18, 2011

U. S. Economy Showing Signs of Stronger Recovery - A Short Term Blip or a Long Term Trend?

No, No One Knows the Answer to That Question But It’s a Positive Event to be Asking That Question

After a spring of hope for the economy, the summer turned into a season of despair as economic activity weakened. However, towards the end of the third quarter economic activity picked up and third quarter economic growth was better than expected and better than the recent past.  Several days ago the report was that retail sales had a strong increase in October and now another report shows the economy strengthening.

New U.S. claims for jobless benefits hit a seven-month low last week, while permits for future home construction rebounded strongly last month, bolstering views the economy was gaining traction.

This was also accompanied by this good news.

Economists believe fourth-quarter growth could top an annual pace of 3 percent, stepping up from 2.5 percent in the July-September period.

It was only this summer that the economics profession  and other observers were worried that the U. S. economy might slip into another recession.  That possibility seems remote at this point.  And since economic recoveries tend to feed on themselves and reinforce themselves, it is now possible, if not probable to see a stronger 2012 than has previously been thought. A strong holiday buying season is the next indicator. All this is good news for everyone (well almost everyone, not good news for Mr. Romney who is desperately hoping for a continuation of the bad economy).

So what’s the bad news?  It’s Europe, who just doesn’t seem to be able to implement rational solutions to its problems.

But the crisis in Europe, which has caused bond market turmoil across the region, could derail the recovery.

St. Louis Federal Reserve Bank President James Bullard said the debt crisis in Europe probably would not hit the U.S. economy hard.

“If it blows up in a big disorderly way, which is what everyone is worried about, then that could come back to haunt the U.S.,” Bullard told CNBC. “If it just tumbles along for a long period of time, which is the most likely outcome, then I’m not sure that you get much feedback to the U.S.

So yes, the U. S. has a stake in Europe not continuing to self-destruct. Thus the message from this side of the Atlantic to that side of the Atlantic is “hey people, get it together”, 

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