Good News Bits

Some community banks and credit unions are now offering up to 5 and 6 percent on cash deposits. There are some restrictions, but they don’t loom large in today’s low interest rate world (see CASH, “Trouble comes to cash.”)

After shrinking four quarters in a row, the U.S. economy has finally changed course: In the third-quarter, gross domestic product (GDP) rose at an annual rate of 2.9 percent, seasonally adjusted. Caution: Most of the turn-around appears to have come from federal spending.

Sales of existing homes are up—sharply. The most recent figures from the National Association of Realtors show a 10 percent increase for October compared with September.

The Conference Board reports that an index of “leading indicators” rose for the fifth consecutive month at the start of the fourth quarter, suggesting the economy will head upward soon. (Caution: The leading indicators have not always been predictive.)

Consumers and economists think they see daylight: According to
Reuters and the University of Michigan, the end of summer saw a gain in consumer confidence of about 7 percent. Economists polled by Wall Street Journal expect the economy to grow by an annual rate of 3 percent in the third quarter, but warn it may be a recovery with continued high unemployment.

A national index of small business optimism rose more than 2 percent over the summer (source: National Federation of Independent Business). A rosier outlook in this group matters, because small businesses employ over 50 percent of workers in the private sector.

Pending home sales have edged upward for 6 months straight (source: National Association of Realtors). Contributing to the rise: the federal tax credit for first-time buyers, low mortgage rates, low home prices, and (unfortunately) a tidal wave of foreclosures.

Continuing a recent down-trend, end-of-summer rates for 30-year, fixed-rate mortgages fell to a national average of around 5 percent—and even lower in some states (Zillow Mortgage Rate Monitor).

Global manufacturing activity picked up going into the fourth quarter: 4% in the U.S., 1.9% in the Eurozone, and 0.7% in China. This result is better than many economists expected. Dark spot: the UK, where activity fell by 0.5%.

According to two federal reports, orders for big-ticket items shot up by 5 percent in July/August. Benefiting the most: home sales, appliances, computers, and planes.

U.S. attorneys have prevailed on the Swiss government to release the names of 4,450 American citizens who may be using Swiss banks to avoid taxes. Evidence came mainly from a former Swiss bank employee. U.S. taxpayers may gain hundreds of millions in back taxes and penalties.

U.S. Gross National Product (GDP) surprised nearly everyone by shrinking only 1 percent in the second quarter. Most economists were expecting 1.5 percent. The previous quarter dropped by 6.4 percent, and the fourth quarter of 2008, by 5.4 percent. So, yes, things seem to be getting better. So far.

The index of leading indicators rose at an annual rate of 12.8 percent in the first quarter. That’s a lot. Based on historical data, it could mean the end of the recession is coming soon. Caution: Results for three of the 10 indicators were estimates, not data, and even the data is subject to revision.

The Commerce Department reported that June housing starts rose by 3.6 percent—more than economists had forecast. Housing-start permits were up 8.7 percent and housing starts, 14 percent. Some of the increased activity came from the fact that April figures were so low, they may have had nowhere to go but up.

The S&P 500, an index of 500 big-company stocks, finished the second quarter up 15 percent.

President Obama presented a wide-ranging package of proposals aimed at tighter regulation of financial institutions and better protection for consumers. A key feature was the creation of a Consumer Financial Protection Agency, in some ways similar to the Consumer Product Safety Commission.

The big news comes from the stock markets. By mid-June, the S&P 500 index of large-cap stocks was up nearly 40 percent from its low for the year. The gain edged the index into the black for 2009.

Reuters announced that U.S. consumer confidence rose for the third month in a row, reaching a nine-month high. Personal consumption represents 70 percent of U.S. Gross National Product (GNP).

The good news from Detroit is that sales of new vehicles in May rose to their highest level of the year. The annualized figure was nearly 10 million. Ford, which has taken no bail-out money, announced it would increase production.

Home sales: The National Association of Realtors reported that its index of pending home sales for April showed a 6.7% increase compared with March.

According to the U.S. Commerce Department, pre-tax corporate profits in the first quarter rose to $1.3 trillion. The gain came on the heels of six consecutive losing quarters.

Inflation: The Labor Department reports that the Consumer Price Index rose only slightly in the first quarter of 2009. The Open Market Committee of the Federal Reserve said it expects inflation to “remain subdued,” because of global excess manufacturing capacity and high unemployment. According to, the inflation rate in mid June was slightly less than zero.

Tax deductions: Investors who sold securities at a loss can use those losses to offset capital gains taxes not only in this year, but also in future years.

Gas for cooling and heating: The price of natural gas in the U.S. has gone down by over 65% since last summer. It’s likely to stay down because of falling demand and new plants set to start producing liquid natural gas.

The national debt: Despite worries announced by a Chinese leader about U.S. debt, the largest holders of U.S. debt – China, Japan, oil-producing countries – actually increased their holdings in the first quarter.

Fraud victims: The Securities Investor Protection Corp. (SIPC) announced it will build its fund to help investors who are victims of fraud by investment brokers. The money will come from high levies on member firms (as well it should).

Copyright © 2009 Richard Evans and Andrew Bromberg