RM's+When+Will+the+Economy+Turn+Around

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 * When will the economy turn around?**

Much of the economic recovery is based on the stabilization of the financial markets. Without banks willing to lend, the economy will not grow. Right now, Federal Reserve Chairman Ben Bernanke is expecting the economy to recover by the end of this year. The recovery of the banking system is largely in the Federal Reserve's hands, and the Fed has a few options (in addition to its current actions) to help, if needed. One of these is buying government debt, as the Bank of England did in the U.K. Many people feel that that method has been very effective, but the Fed still is planning to buy $300 billion more in mortgage-backed securities by May. So far, the central bank has bought $200 billion worth of mortgage-backed securities.

Some indicators of an economy that recover before the end of the recession include residential investment and PCE, which is a measure of inflation. Already, housing starts are picking up, after a long decline after the housing bubble burst. In Feburary 2009, multi-family starts increased by more than 100,000 to an annual rate of 583,000 housing starts.

This is not a clear indication that the housing market has bottomed out because the data could be volatile in the months ahead. However, it does provide some positive news amid the gloom.

The ISM, an indicator for manufacturing, has inched up, although it is still quite low compared to historical standards (it is below 50) and retail sales picked up more than expected in February. Below is chart showing manufacturing health in February of 2009.

FEBRUARY 2009 || Index February ||~ Series Index January ||~ Percentage Point Change ||~ Direction ||~ Rate of Change ||~ Trend* (Months) || From: http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942
 * ~ MANUFACTURING AT A GLANCE
 * ~ Index ||~ Series
 * **PMI** || 35.8 || 35.6 || +0.2 || Contracting || Slower || 13 ||
 * **New Orders** || 33.1 || 33.2 || -0.1 || Contracting || Faster || 15 ||
 * **Production** || 36.3 || 32.1 || +4.2 || Contracting || Slower || 6 ||
 * **Employment** || 26.1 || 29.9 || -3.8 || Contracting || Faster || 7 ||
 * **Supplier Deliveries** || 46.7 || 45.3 || +1.4 || Faster || Slower || 5 ||
 * **Inventories** || 37.0 || 37.5 || -0.5 || Contracting || Faster || 34 ||
 * **Customers' Inventories** || 51.0 || 55.5 || -4.5 || Too High || Slower || 7 ||
 * **Prices** || 29.0 || 29.0 || 0 || Decreasing || Same || 5 ||
 * **Backlog of Orders** || 31.0 || 29.5 || +1.5 || Contracting || Slower || 10 ||
 * **Exports** || 37.5 || 37.5 || 0 || Contracting || Same || 5 ||
 * **Imports** || 32.0 || 36.5 || -4.5 || Contracting || Faster || 13 ||
 * **OVERALL ECONOMY** || Contracting || Slower || 5 ||
 * **Manufacturing Sector** || Contracting || Slower || 13 ||
 * **Manufacturing Sector** || Contracting || Slower || 13 ||

In order to better the situation, the Federal Reserve has announced to increase the amount of mortgage-backed securities that they're buying from $500 billion to $1.25 trillion. Also, because of indications that the Bank of England's efforts to buy Treausuries has produced positive effects, the Federal Reserve has plans to buy U.S. Treasuries. Even more, they plan to implement the [|TALF], a credit facility. The federal funds rate was maintained at 0 -0.25% and the discount was kept at 0.5%.
 * March 18th, 2009**