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Signs of easing in US economic slide

Several indicators offer hope that the recession might be finally nearing the bottom.

By Ron SchererStaff writer of The Christian Science Monitor / March 17, 2009

Andrew Stutsman makes progress on a new home in West Des Moines, Iowa. Such construction revived a bit last month.

Charlie Neibergall/AP


New York

The economy is still sinking, but some economists see a rate of decline that is less precipitous than before. If that’s the case, it could mean the longest recession in US history is beginning to bottom out.

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A slower rate of decline is essential because production of goods and services has been in a steep dive since last fall. Although any lessening of the economic fall probably won’t affect the unemployment rate immediately, it could boost sagging consumer and business confidence and help the stock market, which is often a harbinger of economic improvement.

“We’re still declining, but we can see the valley down below,” says Sung Won Sohn, an economist at California State University, Channel Islands.

Some signs of a better economy include:

•The rate of decline of industrial production has been moderating since December. This is in large part because companies have finally reduced inventories to manageable levels.

•Prices are rising for some key commodities such as copper, which is used by the housing industry.

•Since last fall, the cost of shipping by oceangoing freighters has tripled – up from very low levels. That’s a sign of better global economic activity.

•Some surveys are finding that the consumer mood is brightening. This has translated into higher spending over the past three days.

•Construction of new housing rose 22.2 percent from January, the Commerce Department reported Tuesday. Such activity is still down 47.3 percent below a year earlier, but at least the trend line is in a positive direction, if it holds. (Which region did best? Click here.)

The Fed to meet

The developments preceded a Federal Reserve Board meeting this week, in which the economy and interest-rate policy will be discussed. The Fed has already lowered short-term rates to almost zero, so it is not expected to make any changes to interest-rate policy. Fed Chairman Ben Bernanke has said in recent weeks that the Fed will continue to use nonconventional ways to stimulate the economy.

“Obviously, there will be no change in interest rates, but we will be looking for any changes in wording on the economic outlook,” says Scott Brown, chief economist at Raymond James & Associates, a brokerage house, in St. Petersburg, Fla. “Will they say anything about whether they expect the economy to recover this year, as Mr. Bernanke said on ‘60 Minutes’ on Sunday, or in 2010?”

A sense that the worst of the downturn could be over is one reason the Dow Jones Industrial Average has shown some gains over the past week. The markets have also benefited from some improvement in the stock prices of banks. Last week, Citigroup and Bank of America executives said their firms have been profitable for the first two months of the year.