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Could Small Stuff Be Good Indicators the Economy is Turning Around?

ms_logo_homepage_blog_horizontal.gifQuestion: In trying to understand how to read the signs that we might be in a more robust recovery, I hear a lot about business expansion, hiring, product development and other growth-oriented factors that would serve as key indicators. But I’m wondering if we need to walk before we run (presumably we are crawling right now)? That is, won’t the next indicators be when businesses start doing the things they’ve been putting off for two years, such as replacing mainframes and other large equipment that are more the things they do on a year to year basis not necessarily to grow but to just maintain? Perhaps I’m parsing hairs of the same beast, but I’m thinking maybe we’re looking for big stuff when it’s the small things we ought to keep a closer eye on?

Paul Solman: I’m not sure what you mean. To stay in business at all, companies must presumably “maintain” on a year-to-year basis. It’s lack of growth we’re worried about — new investment that supposedly employs folks. But if you’re a company, why invest when consumers are saving more and government is under such political pressure not to spend more?

That said, of course you’re right. Ramping back up is, in general, a necessary prelude to “expansion.” In that regard, a number of optimistic economists have taken heart in recent days on the basis of evidence that railroad cars are fuller, electricity usage rates up. Both are pretty mundane indices of economic activity. But, say the optimists, a harbinger of growth.

This entry is cross-posted from the NewsHour’s Making Sen$e page, where business and economics correspondent Paul Solman answers your questions on economic news. Follow Paul on Twitter.

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