Defying predictions of a step-by-step wriggle out of recession, the US economy appears set to bounce back into growth. On Friday, the Dow Jones Industrial Average closed up 262.73 points– at 10368.86 its highest since August 27.
The surge was driven by an unexpected uplift in manufacturing during February, the first time in eighteen months that the sector has not declined. The month also saw a robust annualized rate of vehicle sales – 16.7 million units – confounding predictions of decline after last fall’s record pace. The good news was underscored by an increase in household spending in January.
Observed Deutsche Bank chief economist Peter Hooper: “The weak recovery is definitely looking less weak.” He upgraded his recent forecast of 2.75% economic growth for 2002 to “closer to 4%”.
Hooper is not not alone in being pleasantly surprised. No less a personage than the chairman of the Federal Reserve, Alan Greenspan, reported last week to Congress: “The recuperative powers of the U.S. economy ... have been remarkable,” attributing its “apparent increased flexibility and resiliency” to timelier data on such criticals as sales and inventories.
However, Greenspan cautioned that there are still “ample reasons” to assume the recovery will be tepid. His department’s policymakers still predict the economy will expand at a rate between 2.5% to 3% rate during this year, insufficient to prevent unemployment from rising.
But other sectors of the economy also exhibited signs of vigorous growth. In February, the Institute for Supply Management’s purchasing managers’ index zoomed from 49.9 in January to 54.7 last month, passing the fifty-mark (the critical fulcrum balancing industrial decline and growth) for the first time in nineteen months.
Data sourced from: Wall Street Journal; additional content by WARC staff