Is today’s update on new orders for durable goods a sign of an approaching V, U or W? Translated: Is the economy poised to rebound sharply and deliver strong growth—a V recovery? Or is a U-type future, with slow to negligible growth, approaching? Even worse, could an imminent rebound be little more than a prelude to a second recession, a.k.a. the W cycle?
That summarizes the great questions that prevail as the world attempts to handicap the winding down of the Great Recession. As always, the central challenge is that we’re left with a great unknown, even if today’s news on durable goods suggests otherwise.
As monthly numbers go, July’s update for the series is undoubtedly encouraging. New orders for manufactured durable goods in July increased 4.9%, the U.S. Census Bureau reports. That’s the third increase in the last four months and the largest percent gain in two years.
No one can deny that such news constitutes progress. Ditto for the accumulating evidence in other economic reports that the economy, if not quite on the mend, is no longer contracting. A number of clues have been suggesting no less for months, as we’ve been discussing on these digital pages for some time, including the all-important weekly updates on initial jobless claims. Additional support for thinking the economy’s stabilizing arrived in yesterday’s upbeat news on consumer sentiment and housing prices: both are rising.