Fed Report Contains A Little Bit Of Good News

April 16, 2009|By McClatchy Tribune

WASHINGTON -In another small but important sign of improvement in the battered U.S. economy, almost half of the Federal Reserve's 12 districts reported Wednesday that economic deterioration had moderated in their zones and may be bottoming out.

The nation remains locked in the worst economic tailspin since the Depression, so any piece of good news is welcome. However, the report continued to underscore the downturn in manufacturing, more job losses ahead and a grim business climate, especially for commercial real estate. Overall economic activity contracted or remained weak in all districts.

"However, five of the 12 districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level," the Fed's "Beige Book" summary said.

Wall Street welcomed the news, with the Dow Jones industrial average finishing up 109.44 points to close at 8029.62. The S&P 500 closed up 10.56 points to 852.06 and the Nasdaq rose 1.08 points to 1626.80.

The recent stock rally over the past six weeks has also suggested that perhaps the economic downturn is close to bottoming out, since stocks historically have anticipated economic rebounds about six months into the future. That would put a recovery within sight by autumn.

President Barack Obama warned Tuesday against too much optimism, particularly on the jobs front, and urged Americans to be patient. Later Tuesday, Fed Chairman Ben S. Bernanke used an address at Morehouse College in Atlanta to voice cautious optimism.

"The current crisis has been one of the most difficult financial and economic episodes in modern history. Recently we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, homebuilding and consumer spending, including sales of new motor vehicles," Bernanke said. "A leveling-out of economic activity is the first step toward recovery."

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