What a difference a few days have made in the mainstream headlines.
Overblown concerns about Dubai defaults are quickly shifting to the into the shadows. On Tuesday clarity on the extent of the loan restructuring indicated that Dubai World likely would restructure debt worth $26 billion against earlier talk of a possible $59 billion default.
Moving to center stage was a string of economic good news on Monday and Tuesday.
To kick off the week, gains in new orders were the highlight of November's Chicago purchasers' report. Chicago's PMI rose nearly 2 points to 56.1 to indicate another strong month-to-month increase in the pace of overall business activity in that area of the country. New orders rose 1.4 points to a very strong 62.8. The Chicago survey includes both service and manufacturing segments of the economy in its report.
Contrary to a more gloomy consensus forecast, reports Tuesday showed a continued rebound for the auto sales even in the absence of government incentives. Sales of domestic-made vehicles came in at an 8.2 million annual rate in November, considerably above the 7.9 million rate in October.
On the retail front, Redbook reported strong results for the Nov. 28 shopping week. Redbook's year-on-year measure for the week is up 3.8 percent and week over week up 1 full percentage point! (That's 52% annualized). No doubt this is the strongest retail rate of the year and Redbook projects an exceptionally strong 5.2 percent rise in November vs. October. (That's a heady 62% annualized)
Indications in the manufacturing sector continue to point to strength with ISM's report showing continued momentum. The manufacturing new orders component of the index (the report's leading indication for future activity) continues higher to 60.3 for a 1.8 point gain. Acceleration in new orders and gains in backlogs show a healthy mix pointing to rising production and rising employment ahead. Employment continues much improved from earlier in the year, holding above 50 in November from October's very strong level of 53.1. You'll remember the past relationship between ISM's PMI and the overall economy. If the correlation to the PMI for November is annualized, it corresponds to a 3.9 percent increase in real GDP annually.
Then home sales reports were released. You may remember that existing home sales got a giant boost in October as speculation increased that the homebuyer's credit expiration would pull sales forward and then dip in subsequent months. But to the contrary Tuesday's report points to continued strength ahead. Pending home sales jumped nearly 4% in October adding to September's 6% gain. Year-on-year pending home sales are now up a robust 32%.
Then early Tuesday afternoon, Philadelphia Federal Reserve Bank President Charles Plosser gave his views on monetary policy. Plosser (like us) sees economic recovery to be a little more modest than many gloomy economists. Said Plosser, "Looking ahead to next year, I expect real GDP growth from the fourth quarter of this year to the fourth quarter of 2010 to be about 3 percent. I expect similar real GDP growth in 2011. These rates of growth are more modest than what some forecasters anticipate."
This economic recovery continues to build momentum. No surprise here.
When all you read is gloom, turn here for a much different perspective.