Cold, dreary February might not have felt like a time when the economy was heating up. The major economic reports, however, show that the recovery moved forward last month. With March coming to a close, we can evaluate the various indicators we saw in February. Although not all sectors of the economy improved, many areas began improving more quickly than in January.
This can be seen pretty clearly through this chart, which contains the results of 15 selected economic indicators:
Of the 15, just four worsened in February. Of those four, two of them were housing-related. The sector continues to be a drag on the recovery. The decline in saving may be a concern from a long-term standpoint, but saving doesn't do much to directly speed up a recovery. In fact, too much saving could actually prolong the time it takes for an economy to improve. There's no way to spin the decline in durable goods orders, however. It was a small increase, but for firms to speed up hiring, they will need to see orders rising.
How briskly did the other 11 indicators improve? In fact, eight improved either faster or shifted from worsening. This is a pretty solid result, and makes for a better result than the six indicators that improved faster or shifted from worsening in January.
Moreover, for those three indicators with slower improvement, two come with a caveat. Personal income would have had a hard time matching its performance in January, which benefited by a tax rate decline. The unemployment rate also improved by a smaller margin than in January, but that was while the number of jobs created grew significantly. It would have been nice to see small business sentiment improve at a brisker rate, however.
The other eight indicators that improved quicker span the economy. They include consumer confidence, the stock market, spending, retail, jobs, services, and manufacturing. Foreclosure activity also declined in February, but it's hard to count this result as clearly optimistic, since banks are still processing paperwork very slowly, which exaggerates the decline.
Of course, February is already starting to feel like a long time ago. We also know that some significant obstacles were thrust into the recovery's path this month. They include still-rising oil prices, a terrible earthquake in Japan, and persistent unrest in the Middle East. Due in part to these reasons, we already know that consumer confidence has fallen this month.
So although the recovery appears to have picked up nicely in the first two months of the year, it would be premature to say that the skies are clear. If the economic shocks that hit this month turn out to be fleeting, then a speedier recovery should endure. But if they persist or worsen, then a painfully slow recovery could follow.
Notes/Disclaimers about the matrix above:
- This is by no means a completely exhaustive list, but it does take into account many important statistics.
- It represents a somewhat quantitative summary, but no weighting has been used to create an economic index, so the reader can decide how important each statistic is for himself or herself.
- There is some overlap.
For anyone who wants to dig deeper into the numbers above, here's a list of posts that covered some of these February indicators: