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Is the Recession Over?

June 2, 2009

So, do you want the good news or the bad news first? Given the bombardment of bad news of late, I think I’ll start with the good.

Well, apparently there are signs that the economy might already be in recovery mode, with consumer confidence, first-time unemployment claims, orders for durable goods, and even the housing market showing some positive signs.

And yesterday, the Dow Jones Industrial average jumped 221 points, while the Standard & Poor’s 500 index and NASDAQ composite reached their highest levels this year.

But the report that caught my attention came out of the National Association of Credit Management (NACM), an organization that supports approximately 19,000 business credit and financial professionals worldwide. And hey, who better to look to than an association representing what is at the core of every company’s financial well-being – credit management.

According to the NACM, its latest combined Credit Managers’ Index rose from 44.3 to 45.4. That might not mean much to you, but the association said the index hasn’t been at that level since October 2008. And as we are all aware, that’s when the economy went into a nosedive. And with the index a few points from breaking above the 50-point threshold, said analysts, the findings indicate economic expansion rather than contraction.

“The recession essentially came to an end in February and March 2009,” said Chris Kuehl, PH.D., NACM economist. “The CMI data, combined with various other measures, suggest that the economy finally reached its lowest point and has been in recovery stage since.”

And while Kuehl warned not to expect the economy to come roaring back in the next few months, he said the findings support predictions of a turnaround by the third quarter – with the second quarter being the last quarter of negative GDP.

But wait, it gets better. According to the NACM’s survey, sales jumped from 37.4 to 41.8, the biggest increase in the last several months. The data also showed that businesses are slowly leaning toward expansion, as credit is once again being extended.

Even manufacturing showed signs of improvement, albeit slowly (index improved from 44.4 to 45.3). Growth was also seen in the service sectors, which is good news since it represents close to 80 percent of the nation’s gross domestic product.

Now for the bad news: The only sectors that remained in a serious slump, according to the data, were automotive and retail. But hey, I don’t think we’re going to see any improvement here until the job market returns, and that prediction extends well into 2010.

According to the association’s survey, states with the highest rates of job losses and bankruptcies were California, Florida, Michigan and Ohio. Those four states, two of which are the major drives of car sales, also have the weakest performance in terms of credit. However, some states with severe declines – most notably Arizona and Nevada – have shown some improvements.

OK, enough with the bad. Let me give you some more good news. There are signs that we may be in a U-shaped recession rather than the painful W-shaped version that many economists feared. In contrast, a W-shaped recession is often referred to as a double-dip recession because the economy drops twice before a full recovery is achieved.

So what does that all mean? Basically, that means we’re in a normal recessionary pattern. See, a U-shaped recession begins with slow decline and remains at the bottom for an extended period of time before turning. And with the NACM’s index showing signs of returning back to where it was in October 2008 – when the meltdown began to accelerate – I would say we’re about to turn up. In fact, the NACM believes its index will be back above 50 by mid- to late summer, which is where most economists put a possible turnaround. Let’s just hope they’re right.


  1. 1. ted [ June 04, 2009 @ 09:11AM ]

    when are banks going to start loaning money and is any one buying any paper in the near prime market

  2. 2. Marv Eleazer [ July 20, 2009 @ 09:06AM ]

    I don't know where all these people live that are writing these surveys or reports but they must be residents of Mars. Gimme a break already! Sure, we're in a recession and money is tight but not for the elite class. They saunter in and buy when they feel like it and are hardly affected by recessionary times. This class is also the hardest to deal with because they rarely buy on impulse and are shrewd negotiators. The other class that we're dealing with is the poor that have terrible credit and can't buy the cheese off a whopper. Banks have tightened on these people for the obvious reasons. The class that we're missing is the middle that corporate America rides the back of. They are not coming in sufficient enough numbers to move the economic needle to where it was because they feel the pinch everyday at the pump and the grocery store. Until they begin to feel confident again and begin to spend money then we will continue on this same course. There is no way it will turn around by the end of this calender year.

  3. 3. Martin White [ December 14, 2009 @ 05:42AM ]

    Well according to <a href="">This questionnaire</a>
    USA is the last country in the world, which will come out of recession. Apparently it is based solely on people’s opinions, but the fact, that basically 75% of 100% USA citizens think, that recession is not over yet and 17% of them think, that it will not even be over until 2-3 years, is not realistic. I have no idea, whether people have serious financial problems or they just don’t think realistically.

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