Since 2010, we've been down this road several times. The economy shows signs of finally turning the corner, only to fall back to an anemic growth rate.
That could be the case again, but there seem to be five indicators that – in spite of the end of the payroll tax holiday and the federal budget sequester -- the economy is showing real signs of life.
Let's start on Wall Street. The stock market has rallied strongly since January with both the Dow Jones Industrial Average and the S&P 500 both hitting all time highs in May.
Much of the rally can be attributed to the Federal Reserve's policy of pumping money into the economy. But the Fed policy has been consistent for some time now. It's only been this year that stocks have taken off.
Why is this important? Because in past recessions, stocks have been a leading indicator for the overall economy. Investors seem to sense when things are turning around and the market surges about six months before the economy takes off.
One of the more impressive recoveries has been in the housing market, which was devastated by the credit crisis, wave of foreclosures and Great Recession. In many housing markets in the U.S., home sales are rapidly rising and so are prices.
In its most recent MarketPulse report, CoreLogic found that the housing market is recovering, but doing so unevenly. The over-bought and beaten-down markets are recovering the fastest.
Most markets have reached consistent price recoveries in only the last year or two, the report finds. But the real estate recovery remains a local event and a shift is occurring.
Previously, it was the low prices of foreclosures and short sales that drove the market. Now it's new home sales. The recovery in that area, the report notes, is acting like a targeted economic stimulus package because it's leading to more construction jobs and sales of building materials.
The mini-boom in new home construction has led to increased sales of trucks, helping the automotive industry enjoy an even stronger recovery. Auction prices for full-size pickup trucks are up nearly seven percent through the first four months of 2013, according to the NADA Used Car Guide.
"The recovery of home values and increased residential construction, stabilizing gasoline prices and a decline in late-model supply have resulted in higher trade-in values for full-size pickups," said Jonathan Banks, executive automotive analyst for the Guide.
New trucks are also selling well. Sales of the Dodge Ram helped boost Chrysler's April sales 11 percent higher. Ford and GM also had strong April sales. Sales of the Ford Escape rose 52% while GM saw a 28% rise in sales of its Silverado pick-up.
Auto sales have remained consistently strong since the end of the Great Recession, thanks mainly to low interest rates. It's also easier for consumers to borrow money for a car or truck – something that hasn't been true for housing.
Make no mistake, retail sales – a measure of consumer activity – are nothing to celebrate. Sales fell in March, with economists chalking it up to the sequester and higher taxes.
But in April, when more of the same was expected, the nation's retailers actually eked out a 0.1% gain. Core retail sales, which exclude cars, gasoline and building materials, were up a much stronger 0.5%.
Since retail sales account for about 30% of what consumers spend, the increase – small as it is – is being viewed as a hopeful sign.
Consumers may be spending more money on vacations this summer. TripAdvisor, a travel site, surveyed 1,200 U.S. consumers and predicts a 30% are planning to travel over the Memorial Day weekend. It also found 86% plan to take a trip during the summer.
Fifty-three percent of those who plan to travel this summer plan to spend the same on their trip this year, while 25% expect to spend more. Travelers are also looking for savings – 71% said they would take a spontaneous trip if they find a last-minute deal.
Despite these positive indicators, not all economists are sold on the idea of a recovery that has finally taken hold. Kathy Bostjancic, Director of Macroeconomic Analysis at The Conference Board, doesn't see a lot of optimism in recent indicators, especially retail sales.
“The combined fiscal drag from the increased payroll tax rate and sequester spending cuts total $225 billion for this year, which offsets the positive wealth effect created by the rise in equity prices and appreciation in home prices over the past year,” she said. “The spring swoon comes after a winter spending spree of which the window of retail opportunity has apparently closed.”
Bostjancic said she wants to see a pick-up of job and income growth in the second half of 2013 before declaring that things are finally getting better.
Since 2010, we've been down this road several times. The economy shows signs of finally turning the corner, only to fall back to an anemic growth rate.Th...