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Winter Brings Spring (eventually)…..

The 2008 – 2009 winter in Minnesota has been longer and colder than in recent years. The slowing economy and the downward spiral in the stock markets has probably made it seem even longer and colder for many of us. Melting snow, the first robin spotting, and the fresh green growth of grass and trees are subtle but sure signs that spring is just around the corner.

The economic news lately has been mostly gray and dismal, and some of you may be wondering if the economy and stock market will ever turn around. We have been watchful for turning signs, and we are starting to see some small tentative signs of “spring” in the markets.

Credit markets are starting to thaw, and bond prices and bank lending are showing signs of stability. Corporations issued $127 billion in bonds during January, the most since May. Personal Income was up 0.4% in January, its second month of improvement, and spending rose 0.6%. Perhaps even more important for the long-term health of the economy, the savings rate has now risen to 5%, building a foundation of savings, not debt, for the next expansion. More proof? Check out this list offered by economist Irwin Kellner at MarketWatch:

  • The Conference Board’s index of leading economic indicators has risen for two months in a row.
  • Producer prices have increased for two straight months.
  • Consumer prices rose in January – the first monthly gain in six months.
  • Thanks to lower interest rates, applications for both new mortgages and refinancing of existing mortgages are rising.
  • Real hourly earnings rose 4.5% in December following a 3.3% increase in November.
  • Retail sales shot up by 1% in January – the first monthly rise since June.
  • The ISM index of manufacturing has gone up slightly for two months in a row.
  • The ISM index of services rose last month for the second month in a row.
  • The money supply is soaring, a sign that there’s plenty of liquidity in the economy.
  • The 3-month London interbank offered rate, a measure of banks willingness to lend to each other, has dropped to 1.2% from close to 5% a number of weeks ago.
  • Some securities on banks’ books are starting to recover in value, and new Treasury programs should speed this effort.

Initial signs admittedly, but as Kellner comments, you have to crawl before you can walk. With spring comes warmer weather and a nice thaw in the economy. Things are looking up!

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