Here are 11 recent facts and figures that appear to be pointing toward sustained economic growth and a bull market that is here to stay.
Of the 290 S&P 500 companies that had reported fourth-quarter earnings as of last week, 236 saw higher earnings per share than in the previous year’s report. That’s a big number — and worth noting, since there was a lot of bluster about the end of easier year-over-year comparisons now that we are farther removed from the worst of the recession and financial crisis. Also noteworthy is that more than 70% of S&P 500 stocks topped Wall Street earnings-per-share forecasts in their fourth quarter.
Shipping stocks surge
It’s no secret that there’s a correlation with shipping and freight companies and the broader economy. The more goods moving around, the more consumers are buying and businesses are selling. So consider that rail giants Union Pacific (NYSE: UNP – News) and CSX Corp.(NYSE: CSX – News) have both significantly outperformed the market in the past 12 months, with the majority of those gains coming since September. And consider that United Parcel Service (NYSE: UPS – News) is forecasting record 2011 earnings of as much as $4.35 a share, which if achieved would be 22% above last year’s numbers. Those are encouraging signs.
Americans using plastic again
Yes, too much debt got us into this mess. But the fact that U.S. consumer borrowing rose in December for a third consecutive month may be a good thing. Why? Because it marked the first increase in credit-card charges in more than two years — and is probably the driving force behind improving holiday sales. What’s more, psychologically consumers are in a better place if they are swiping plastic. That implies they believe they’ll have the cash in a few months to pay off debts. Though whether or not those bills actually get paid is debatable, the change is sentiment is certainly a good sign.
As with credit, inflation isn’t always a bad thing. If you recall, the doomsday scenario economists were discussing in the depths of recession was “deflation,” with horrible parallels drawn between the U.S. and the Japan of the 1990s. While it’s true that runaway inflation would hamper economic recovery and put pressure on fragile consumer spending improvements, it’s also true that a little bit of inflation is a good thing because it keeps people from hoarding cash. Specifically, if HDTV prices are rising, consumers are more apt to buy and less apt to wait for a better deal. The tipping point of inflation can and will be debated, but as of right now we appear to be in a good place.
Dollar is declining
A weaker dollar boosts American competitiveness with exports. And investors should take note, because a weak dollar also boosts the foreign profits of multinational corporations. For instance, in 2009 when the euro was improving against the dollar, United Technologies Corp. (NYSE: UTX – News) stated that the company adds about $10 million in annual operating income for every penny the euro gains against the dollar. Once again, a declining dollar can be bad if it passing a tipping point, but a moderate weakening of the U.S. currency could help economic growth and many stocks with a global footprint.
Manufacturing and mending
Just recently, the Institute for Supply Management released its January manufacturing report that boasted the highest reading since May 2004. Every reading included in the report registered faster growth, including a big spike in new orders and the 16th straight month of employment gains in the sector. The U.S. is not the manufacturing economy it was decades ago, but there’s no denying the importance of these jobs in certain regions of the country.
Improving job market
On a broader jobs note, a recent Challenger, Gray & Christmas report noted the fewest layoffs for any January since the measurement began in 1993. And in a separate report from ADP, payrolls among private employers rose by 187,000 in January. Granted, we have a high unemployment rate so wee need a lot more months like this, but stability in the job market should not be dismissed as immaterial.
Stocks are up nicely
The major indexes added more than 10% last year — with the tech heavy Nasdaq surging 16% in 2010. What’s more, stocks closed the best January since 1997. The stock market is not an apples-to-apples comparison with the economy, but it’s not a bad indicator of sentiment. And sentiment, for what it’s worth, has been dramatically improving.
Fourth-quarter GDP was strong
In case you missed the January U.S. gross domestic product numbers, the economy grew at an inflation-adjusted annual rate of 3.2% in the fourth quarter as Americans spent more and exports ticked up. The headline number alone is cause to be optimistic, but the fact that the gains were driven in large part by the consumer instead of business spending is a very encouraging sign.
2011 GDP outlook is improving
Also in January, the economic committee of the American Bankers Association increased its GDP estimate for 2011 by about 10% on the year. Specifically, the group said gross domestic product should expand by 3.3%, up from its previous estimate of 3% that it made in June. This is just one group, and it is way too early in 2011 to know what the year will hold, but it’s still noteworthy nonetheless.
Wall of worry persists
Think the past reasons are just the musings of an out-of-touch Pollyanna? Are you eager to jump onto the message boards below and post your 10 reasons for economic decline? Good. Because unlike some economic gains built on irrational exuberance, a healthy does of skepticism will keep the recovery honest.
These facts and figures collectively tell a pretty compelling story of economic recovery — but certainly not a complete one. If you disagree or have some numbers of your own to share, please post them below.