New year, new hope

New year, new optimism

Yesterday saw the first day of trading for 2010 and the new year appears to have installed new optimism on the financial market as share prices edged higher in the light of rising commodity prices.

But the optimism was accompanied by caution as policymakers promised to maintain their efforts to sustain the nascent recovery. December also saw an increase in activity in the US manufacturing sector, which encouraged stock markets to rally signalling that perhaps America's economy may finally be recovering and may start creating more jobs than its losing.

This may begin to convince analysts, and the US President himself that the US is not destined for a "W" shaped recession. "This is what we need in 2010 for a V-shaped recovery," Alan Lancz, president of Alan Lancz & Associates in Ohio, told UK newspaper The Independent.

"A fresh start for the year"

"It's a very positive sign to have the ISM follow-through after months of improvement in leading indicators. Being over the 50 level is important, but having an increase on top of that especially bodes well. Looks like we're off to a fresh start for the year."

Positive economic data from China and Europe also added to the optimistic mood.

As the BBC reports, in China, manufacturing data showed the sector growing by the biggest margin in five years, while UK manufacturing saw the fastest pace of growth in two years.

In America the manufacturing sector grew for the fifth straight month in December, and at the fastest pace for more than three years, according to data from the Institute for Supply Management.

Slow reduction in unemployment

But despite the positive figures from the manufacturing sector, unemployment remains the most important indicator as to whether the economy is truly on the road to recovery in 2010, because the US consumer accounted for two-thirds of domestic economic activity before the recession hit.

Any reduction in unemployment is likely to be extremely slow given the severity of the economic crisis, but President Obama and his administration have vowed to push through proposals to support job creation in the next few weeks.

Let's just hope the cautious optimism is short lived, to be replaced by simple optimism.

Related Articles:

A $20bn Xmas present from Citigroup | US market feeling the burn | Consumer growth doesn't tell the whole story

Like this article? Get the RSS feed: