Is The Economy Starting Its Recovery?

Earlier this week, FOMC minutes were released, sharing what went on during the last Federal Reserve interest rate policy meeting. The minutes reveal that the members of the Fed are fairly certain that the economy is starting its recovery. Some of the issues being cited as reasonably positive include:

• Housing market (home sales are rising, and prices are starting to recover in some markets)
• Motor vehicles (but that may be tempered now that Cash for Clunkers is over)
• Consumer spending is leveling out, rather than continuing its downward trend.

Of course, there are concerns about declining household wealth, as well as worries about a credit situation that remains tight for businesses and individuals alike. Members of the Fed are split over how quickly an upturn will take place, but it doesn’t appear that there is much discussion about the fact that the economic recovery will soon be underway — if it isn’t already.

And it is true that some of the data looks promising. Even though August retail sales are down, they aren’t down as much as they have been. And continuing jobless claims continue to decline in the labor market. (Of course, the decline in claims could be due to the fact that you can only collect benefits for 26 weeks, and people are dropping off the rolls.)

All that’s left to be seen is how quickly the economy recovers, and what shape it takes. Personally, I think a gradual recovery would be best for most of us. It would give us time to continue to develop better personal finance habits, and give the economy and businesses time to adapt to an economy that is not driven by debt-fueled consumer spending.

What do you think? Is economic recovery starting? Or are such optimistic thoughts premature?

Image source: sxc.hu