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Good News and Not so Good News

February 1, 2010 – 2:14 pm

The December Personal Income and Consumption reports were out this morning. Real consumer spending after taking in consideration for inflation rose .1% after a .4% gain in November. That was less than the .4% expected but it was the fourth month of gains in a row. It is down .5% from a year ago December. However, real after tax incomes rose .3% and they are up 2.3% from a year ago. That was higher than expected. These numbers resulted in a 5% savings rate. Consumers are still very cautious.

Also out this morning was the ISM report for January. This is a gauge of factory strength and it rose to 58.4 in December. The expectation was for a rise to 56. It’s the highest reading since August of 2004. The interpretation is that a reading over 50 means our economy is expanding. This recovery looks to be broadening out and may well be sustainable. There was a fear that the cash for clunkers program gave it a one time boost but that seems not to be the case.

The indications are that we are still in recovery from the recession and gaining strength slowly. Jobs are still far off but sometime this year there will be some growth.

The drag on the recovery is coming from real estate. Construction spending was down 1.2% in December and they revised November’s number downward. Both numbers were bigger than the experts expected. This is why the recovery, while on track, is slow and will continue to be so. There is likely to be little improvement in that sector.

Good Trading

Steve Peasley

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