CNBC Fresh Signs of Economic Bottom May Take More Time

Optimists looking for fresh signs of a recessionary bottom will have to wait until next week to find more evidence—as indicated by Friday's payrolls report—that the worst is over. “This week is a tough week because there isn’t anything to sink our teeth into,” says one such optimist, Robert Brusca, chief economist at Fact & Opinion Economics.

At best, there's the weekly initial jobless claims Thursday, which could confirm what some see as part of a recent trend suggesting improvement is near.
The more heavyweight data, however, comes next week with monthly reports on the retail, housing and industrial sectors.

“The key is in things like orders for manufactured goods, home sales, car sales,” says David Resler, chief economist at Nomura Securities. "Those are going to tell us how close to a bottom we are.”

Retail Rules
March retail sales, due out April 14, certainly will be a headline report.
“Retail sales is all important,” says Ram Bhagavatula, managing director at the hedge fund, Combinatorics Capital. “You need to see persistent increases in retail sales.”

Right now, momentum is heading in the right direction. Sales climbed in both January and February after an extraordinary and highly unusual two-quarter contraction in the second half of 2008.

Based on surprisingly strong auto sales data for March, released last week, the consensus for March retail sales has brightened to possibly a third consecutive monthly increase. Excluding autos, sales are expected to rise 0.7 percent, according to Briefing.com’s survey.

“Auto sales are kind of encouraging,” says Brusca, who says it’s still too soon to say which way the headline retail sales number will go. “The consumer is holding up his end of the bargain.”

That may also finally be true of housing. Housing starts and building permit data scheduled for release April 16 may show another increase.

“We may be at the point where builders need to start putting up homes again," says Resler. Though much has been made of the glut in new homes in the past two years, inventory has shrunk sharply and is now near historically normal levels. In addition, “inventory may not be evenly dispersed,” says Resler.

More indicative housing data—existing and new home sales—however, won’t be out until April 23-24. If retail and housing are indeed in the process of bottoming, then there may be another pleasant surprise next week—the University of Michigan’s preliminary report on consumer sentiment in April.

“I think you could get a little bounce there, reflecting the improvement in the stock market,” says Bank of America Securities Chief Economist Mickey Levy, who emphasizes that the index has been hovering at a very low level.” more...