USA Today
Forecasters who thought the U.S. economy might have turned the corner in January after a bad December were hoping for more good news this month. They aren’t getting it.
Barely halfway through February, the first few signs have some economists thinking that January’s modest good news was an aberration and that the economy remains on a downward slide.
"January and December were so different that February’s going to tell you a lot," says Ethan Harris, a senior economist with Lehman Brothers. "The early signs are not good."
Retail sales, which rose in January, have fallen back in February, according to Redbook numbers. So have car sales. Initial unemployment insurance claims, which fell in January, are rising again, despite a slight downtick yesterday.
Prices for bellwether commodities such as lumber and computer chips have plummeted, a signal that demand continues to shrivel. And after roaring ahead earlier, the stock market has given up most of its gains for the year.
On Tuesday, Federal Reserve Chairman Alan Greenspan told a Senate committee that the "exceptional weakness" that made December’s data so grim "apparently did not continue in January." Among other things, consumers returned to malls and auto dealers in heartening numbers.
"I’d never be so presumptuous as to second-guess (Greenspan)," says Jason Trennert, managing director of International Strategy & Investment."But our own data suggest that whatever modest acceleration in economic activity we saw in January has started to fade."
Trennert says what happened in January was probably just a temporary bounce sparked by milder weather and aggressive discounting by retailers.
Harris says both December and January were exaggerations and that February looks more like reality. "Really, what you have is a manufacturing recession and moderate growth in the rest of the economy," he says. Like most analysts, Lehman Brothers is forecasting very slow growth, but no recession.
But economists have been revising their views a lot lately, and the indicators have been unusually confusing — typical of a period when the economy is at a turning point. Despite February’s gloom, for example, a key gauge of manufacturing activity in the Philadelphia region improved slightly yesterday, as did a national homebuilders survey.
With consumer psychology crucial to what happens next, economists are anxious to see today’s University of Michigan consumer sentiment survey.
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