International Monetary Fund – Calls the bottom
August 18, 2009 by admin
The IMF (International Monetary Fund) today announced the world’s economic recession is officially over. The IMF, which is taking a global view of the economy, is predicting an unprecedented turnaround for the worlds markets, one that will feature challenges and surprises. The IMF, in issuing today’s statement helped to ignite a stock market rally for equities and calm the nerves of anxious investors who have been sending global equity markets lower over the last week.
The news out of the IMF, follows a similar report out of the FOMC last week, when they announced there would ne no change to the Fed rates. The news is not an endorsement that the recession in the United State is over, rather it reflects a global view that the worst of the economic issues has ended. The end of an economic recession is usually characterized by positive growth in GDP (Gross Domestic Product). GDP is not likely to see positive growth in the U.S. for the next several months as the U.S. economy has been more significantly impacted by the recession.
Nationally, there still remains a number of lingering issues that are weighing on the economy, and a clear sign that the recession locally has not come to an end. The job market report has shown signs of improving, but the national unemployment rates remains well over nine percent, and the country lost over two hundred thousand dollars in the month of July. Consumer confidence has yet to improve, and will be one of the major catalysts in helping to improve the economy. Consumers, through spending are one of the largest contributors to GDP and to date consumers appear to be viewing the current economic recession as an opportunity to reign in their spending and ratchet up their savings. The improvement in GDP will begin once consumers help to turn the tide. The lingering issues with the employment market and housing market are large issues that are weighing down on consumers. The lingering issues are amongst the factors that helped to influence the Fed’s decision to leave rate unchanged last week.
The housing market continues to mystify the market. Today, housing starts were down for the month of July, a surprise that almost derailed the housing market. Following strong numbers last month in the three major housing reports (existing, new sale and prices), expectations were high that housing starts would be improving. A decline in housing starts may be only a blip on the radar for the market, but is a clear signal that challenges remain in the broader housing market.
The news out of the IMF today was a positive shot for the confidence of consumers and investors. Today’s economy is certainly more globally influenced than in years past. Emerging markets could help to lift the economy and provide new opportunities for manufacturing and production as the economy works itself out of the present challenges.