Recession Clouds Seem To Be Clearing Away After All!

Hooray!!! The recession clouds seem to be clearing up after all! Sigh!!!…I’m so relieved on hearing this. All this while, it was recession, recession and recession everywhere. Be it social circles, family circles or the corporate world, the recession epidemic seems to have spared no one. But now reports from the world economic observers say that it might be over after all. Certain observations indicate an improvement in the world economic health. After all, we have learnt to win over battles and it seems we’ll be winning our economic battle soon. So survivors just wake up and see what these observations mean to you.

Well these observations don’t say of a significant change, but as its said that the morning shows the day, since the clouds seem to be drifting away, we can assume that positive changes will come up soon. However, I would like to take this with a pinch of salt.

Commodities Prices Rise But who’s Ready To Buy?

The prices of consumer products like oil, metals like copper and nickel gold seem to have risen higher than the former months. According to the reports of Bloomberg , the Guardian and CNN Money the world commodity sector seems to be experiencing a new high. Most of the commodities like gold and white sugar are trading at record highs. So far so good, but is it really time for us to rejoice?

Firstly, economic recovery calls for a higher demand for industrial raw materials, which is on the rise. Also though the price rise indicates a rise in the intrinsic values of commodities, ultimately their demand by the retailers and the consumers will decide if the price rise is a success. Now the price of oil is $70 per barrel, but if the price goes up to $100 will you, as a consumer want to buy? I don’t think, when my bruises from the economic assault have not healed up yet, I cannot think of purchasing at elevated prices. If more people like me don’t purchase, the demand for the product will get lowered and ultimately the prices have to fall once again. This is still indicative of a recession and not recovery in the true sense of the word. Higher inflation apprehensions and stringent bank policies might reverse the price hike. This is what you’d want to read about this from the Guardian.

Consumer Incomes Are Rising But Is The Buyer Capacity Increasing?

True in the last few months the consumer income seems to have gone up. Some experts feel that increase in the income gets mapped on to higher spending capacity. Agreed! But spending capacity is different from actual spending. If you are a recession survivor with a salary hike, you might agree with me when I say that after all these difficult days I will want to save my money rather than spend it on commodities with huge price tags. When I’ve suffered for so many months leading a modest life due to wage slashes and high risk of being thrown of out job due to job curtailment, I know the value of money more now than ever. I know how precious it is. I might be empowered to spend but now I’ll be more frugal. Having tasted economic insecurity once, I’ll not spend on commodities, that too when the prices are touching the skies. Rather, having learnt a lesson from the economic hardships, I’ll try to save much as I can to make my financial future secure. So, on the whole I don’t think higher spending capacity necessarily maps on to higher spending in actuality. Besides, the paces of rise in income and rise in commodity prices are nowhere comparable with the latter being very fast.

Also, the percentage of unemployed people is not less. A lot of people are still crawling their way to economic safety after being thrown out of firms. So how can you think that higher incomes for a select few can actually indicate the end of the recession?

Is The Increased Home Affordability Just A Bubble?

The number of people buying property seems to be on the rise. Also, the number of first time buyers seemed to have reached a record high. The US property market seems to be seeing it’s peak in 40 years. This seems good news. But let’s not forget that this can be a simple bubble which runs the risk of bursting anytime. According to a Shiller, a Yale University Economics professor, “The low interest rates, the affordability is leaning that way and the ratios are back down”. “I get glimmers of excitement among some people, but we still have a high inventory of unsold homes, and we still have a lot of weariness because of the recent experience.” “It’s clearly not over yet”.  “It’s not obvious that people are really ready to spend again. That may take years to rekindle that normalcy.”

You can read the Shiller report at Wincoast and Medina Report.

Now this is something clearly indicative of reasons for us to think over before we start rejoicing the fading of the recession. People are buying because of the buying convenience offered by the housing cooperatives in terms of low interest rates and not actually because they are wealthier and are able to spend on property.

Manufacturing Growth Is Impressive, But There’s Still A Long Way to Go!

A record increase in the manufacture of commodities is seen in the recent months- June onwards for many countries. This is because of greater demand for commodities from the domestic and international markets. But as discussed earlier, due to the high prices, if the demand for commodities gets stalled for some reason, you can expect the manufacturing to go down. However, let’s be optimistic in this.

Foreign Inclination for US Bonds

According to a Wall Street Journal report, other than China, Japan and U.K. seem to have increased their holdings in the US. Now this is something that you can take as a positive indicator given that foreign bondings contribute much to the US economy boost.

High Consumer Confidence

It’s been observed that with high salaries, the increase in spending capacity and the home sales statistics talk about high consumer confidence. Agreed, but the percentage of people who are not confident owing to unemployment is not ignorable. This factor might be indicative of an improving economy, but still there’s a long long way to go especially when things are very volatile.

Is Cash For Clunker’s Program Indicative of Bettered Economy?

Some excited experts feel that the Cash for Clunkers program of President Obama is painting the town red with its money for exchanging old cars for new ones with money for the consumer. This has no doubt increased the demand and sales of automobiles. But this should not be taken as an indication of improving economy.

Many dealers are having problems paying up for rebates and they are not getting government financial aid. They’re pulling out of the program. If the recession is really going why is the government not helping them out?

The other reasons that seem to be giving a positive indication are an apparently bursting inflation bubble and other European countries seeing a high in their economies. Well, I don’t want to sound a pessimist. A fading recession in the true sense definitely makes me feel happy. But a realistic picture will always show where we are so that we don’t get disappointed later.

However, as things appear, the clouds seem to be clearing, but it’s for us to see how long they’ll take to clear and if they’ll not be blown back into place by some stormy winds. However, full sunshine seems to be still some distance away. Let’s wait and watch!