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With so much varying data being reported, it’s often a nearly impossible task to gauge the health of the economy until after the fact. Naturally, that doesn’t stop the supposed experts from bickering with each other and choosing to point out the numbers that support their arguments while ignoring the others. This arguing has been ever-present of late, one year after the enormous stimulus plan was put into action. Like the experts, I’d like to focus on one important piece of data that indicates we may finally be getting the economy back in gear.
A recent Wall Street Journal article appears to indicate that the many actions taken by the U.S. government may actually be succeeding in stimulating the economy. The article notes that the economy grew at an impressive rate of 5.7% in the fourth quarter of 2009. Naturally, those who were in favor of the stimulus package will focus on the positive aspects of this data while those who opposed it will point out the negative factors.
Those who approved of the stimulus will view this growth and point out that the aggressive actions of the Federal Reserve played a significant role in the country’s ability to recover quickly and, in fact, expand considerably. Additionally, regulators will be credited for prodding banks to clean up their balance sheets, reduce their leverage, and shore up their capital.
Individuals opposed to the government’s actions, will claim the growth was more the result of economic cycles than any government intervention. Further, they could point to the fact that companies were rebuilding their inventories, which led to an artificial expansion that provided a temporary jolt to the economy.
When determining the health of the economy, there are several factors at play, many of which are contradictory. Therefore, it’s unrealistic to take any one piece of data and claim it proves one thing or another about the economy. Still, it’s nice to see one piece of data that suggests we’re at least heading in the right direction.
