Investors herald a recovery
Boston — The nation has at least one group of believers in economic recovery - investors.
Stock buyers sent the Dow Jones industrial average, an index of share prices, past its all-time high Tuesday afternoon. These investors, primarily such institutions as pension funds and mutual funds, acted on their faith that the US economy is not plunging deeper into recession, but is headed toward an upturn.
Most economists forecast the recession would end last spring or summer. When that did not materialize, deep skepticism and gloom settled on the nation, particularly as the number of jobless crept ever higher. By last month, almost 12 million were out of work, amounting to 10.8 percent of the labor force.
But now some economists are cautiously sounding optimistic once more. For instance, Sam I. Nakagama, an economist with Kidder, Peabody & Co., a Wall Street firm, says: ''There are encouraging signs that October will mark the bottom of the current recession.''
Citibank, in its Economic Week publication, maintains ''it's reasonable to forecast an imminent business recovery in spite of the dismal unemployment numbers.'' The timing of the recovery, the bank adds, will depend on how enthusiastically consumers spend on Christmas gifts.
Several factors have prompted the revived spirits:
* Helped by cut-rate sales financing, auto sales have revved up. The automakers sold cars at at 6.5 million annual rate in November, their best for the year since a similar rate in May.
The sales surge is expected to reduce dealer inventories, especially of 1982 cars, making way at some point for new orders of 1983 models.
Noted Citibank: ''The acid test of auto demand won't come . . . until the 1982 models have been cleared out. But the November results still are impressive enough to suggest that underlying demand has strengthened.''
* Real estate firms have been enjoying a marked pickup in sales of existing homes and homebuilders report an upswing in orders for new homes. New single-family home sales averaged 487,000 units at a seasonally adjusted annual rate in October. That's about even with the revised September sales rate of 489, 000 units, but both the August and September numbers are up substantially. Sales are now 45 percent higher than their worst point last spring.
* Chain stores, on average, reported improved sales in November. Promotions also played a part here. Nonetheless, Citibank concludes there was ''an undeniable improvement in November.''
Of course, in any early stage of recovery, the economic statistics are a mixture of good and bad news. Citibank says industrial production probably fell again last month, although perhaps not as deeply as the slide in October. Orders for durable goods fell about 5 percent.
The usual forecast, including that of the administration, is for a modest if not slow recovery starting early next year. Some more cheerful notes are now being sounded. For example, Dr. Robert J. Genetski, chief economist with Harris Bank in Chicago, said Tuesday: ''The first evidence of the economy's reaction to the tax changes is extremely encouraging. It suggests that the odds of a brisk recovery, accompanied by fairly substantial gains in productivity, have increased.'' He also spoke of the increased savings flow and of the sharp drop in initial unemployment claims in early October.
As for the excitement in the stock market, it was partially prompted by a prediction by a well-known economist, Henry Kaufman of Salomon Brothers, that both short-term and long-term rates would fall further (See story Page 10). Volume was heavy, with scores of major blocks of stock trading hands as institutions rushed to get into the market.
The major bull markets Percent gain Years Duration in DJIA 1921-29 8 yrs. +497% 1932-37 4 yrs., 8 mos. +372% 1942-46 5 yrs., 1 mo. +129% 1949-61 12 yrs., 6 mos. +355% 1962-66 3 yrs., 7 mos. +86% 1970-73 2 yrs., 7 mos. +67% 1974-76 1 yr., 10 mos. +76% 1978-81* 3 yrs., 2 mos. +38% 1982-? since Aug. 17 +37% * The Dow had a bullish rise in 1980 only, but S & P 500's rise goes back to 1978. Source: The Nicholson Report