Is the Economy “Back?”

The New York Stock Exchange had wonderful news for the world last week as it closed above the 9000 mark for the first time since January.  The numbers were driven up by a third straight month of increases in home sales.  Since the real estate and mortgage meltdown led the economic downturn, it seems fitting that it signal a turn in the markets, as well.  But one is left with this question: is this the start of the road to recovery?

Stronger than expected earnings of banks (we’ve been talking about those for several weeks now) and optimistic economic forecasts (Fed Chairman Ben Bernanke gave his report on Capital Hill last week) boosted the feeling of investors and they returned to the market in droves on both Thursday and Friday.  But are they back to stay?

The numbers on jobs still look bleak.  Because of the stagnation in wages and the job market, consumer confidence fell in July.  And consumers, as we all know, drive the economy with their confidence.   Consumers either take the bait “carrot” of a sound economy and return to the market to spend, or take their dollars and go hide under their bed, waiting for the storm to pass.

But some are saying that any recovery won’t be led by consumers this time around.

“The consumer isn’t going to be a leader in this recovery,” said Nigel Gault, Chief US Economist at IHS Global Insight in Lexington, MA, who accurately predicted the gloom of American consumers.  “Consumers are aware that the labor market is still pretty bleak.  Any recovery in consumer spending will be very, very modest.”

Modest indeed.  The dollar is still very weak, so Americans, aware that their dollar will buy less and less abroad, are staying home.   An influx of Europeans and other foreign nationals should be expected as the year goes on.  Because their foreign monies are trading higher, global tourists venturing into the United States should be in great supply.

While there are a few signs of stirring confidence, this is still a very weak economy.  You can see that in the steadiness of the price of gold as any gains are made haltingly, by inches and not miles.   The price is presently hovering just above $950.00 and expected to hang there, watching the markets with very restless eyes, just like the rest of us.

Tags: dow 9000, economic rebound

Category: Gold Prices