The markets and governments around the world are now beginning to say that the worst of the recession is behind us. Even large banking institutions in the US are looking to repay TARP funding so that can return to private ownership. In Europe senior policy members are saying that a sustainable recovery could be starting without requiring any further stimulus.
The confusing thing is that if there were a real recovery then we would be seeing real recovery in manufacturing capacity utilisation.
Up till now corporate organisations have been running down inventory as customers have delayed purchasing decisions because of worries about job security etc.
Recently we have seen plenty of surveys about consumer confidence returning and that house prices might be bottoming out.
These surveys are supposed to give us a window into the future sentiment of the economy.
Are these surveys correct? Who knows?
What we do know is that a recent manufacturing capacity survey said that capacity utilisation is near and all time low.
Jobs are continuing to be lost and people are continuing to delay their purchasing decisions. Until people begin to increase their purchases and organisation begin to increase capacity and begin hiring again short term confidence surveys etc will do very little to accurately predict the direction of the economy.
During the week Fed Ex, a barometer of general activity in the wider economy was negative and said we were a long way from exiting the recession.
Organisations such as Fed Ex are good indicators into the activities of corporate activity in the real economy and can tell us twice as much about the economy than the plethora of short term surveys that are consistently released.
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