View From Down Under

Back in November, I wrote that the recession was over – though it may not feel like it.

This week, the Conference Board released their data on leading indicators.  The index was up again in December, and has “risen steadily for for nine consecutive months.”  Here’s the chart:

The Coincident index has been rising as well, up for five of the last six months.  Building permits, stock prices, consumer expectations, business capital expenditure, industrial production, manufacturing sales – all up.

Interestingly, consumer confidence is lagging, and consumer assessment of the economy is decidedly bad.

A recent Gallup poll shows how pessimistic consumers are on the economic situation.  Asked the open-ended question “Just your best guess, how long do you think it will be before the US economy starts to recover?”  Remember that, from an economist’s perspective, recovery probably began in July/August last year.  Here’s the results:

Fully 85% of the people surveyed expected it would be one year or more before the economy starts to recover.  About half the survey expect it will be three years or more.  Put another way, half of the population thinks the US will be in recession for at least another two years.

Now, it’s possible (in fact, highly likely) that the average consumer’s definition of recovery is different to economic definitions, and the survey respondents are actually answering a different question.  They may think it will be two years before the economy is back to where it was in 2007 (which is also historically pessimistic).  Psychologically, the last 18-24 months experience is much more relevant to most people than experience prior to that.  Recent experience is still felt emotionally while more distant experience is only a memory.

Clearly, to most Americans, it does not feel like the recession is over.  And there are some highly acclaimed economists who are concerned about a ‘double dip’.  But with leading indicators climbing that dramatically, and the rest of the world pulling out of recession as well, a double dip looks less and less likely.