The latest indicators by which the course of the US economy is measured show that something quite important may be happening: the world's largest economy is at last stabilising after a period of volatility in the wake of the dot.com crash and the tech meltdown.
Three sets of figures published yesterday make the point. Consumer confidence is slightly up; retail sales are sluggish but gaining, and wholesale prices are falling, keeping inflation in check.
These advances were sufficient to sustain the upbeat mood generated in the markets on Wednesday by good revenue news from Microsoft, the first solid indication that confidence was returning to the information technology sector.
The blue-chip Dow Jones Industrial Average made further advances after surging 2.3 per cent, or 237.97 on Thursday, the biggest gain in nearly two months.
The beleaguered Nasdaq Composite Index also moved ahead again after its huge 5.3 per cent gain on Thursday, the biggest one-day percentage rise in three months.
As so often, the key to overall sentiment is consumer confidence, closely watched by Federal Reserve chairman Mr Alan Greenspan who has lowered interest rates six times this year by 2.75 percentage points to boost economic activity. This is measured by the University of Michigan's consumer sentiment index and its latest survey shows that American consumers are in fairly good shape and are probably keeping the economy from slipping into recession.
Confidence edged higher for a third straight month in July, rising to 93.7 from 92.6 in June. This continued a gradual but steady recovery from a low point of 90.6 in February, its worst level in nearly five years. The expectations index, a gauge of attitudes about the coming year, also rose to 89.5 after jumping to 86.9 in June, though the current conditions index, an assessment of how consumers gauge their present financial fortunes, fell to 100.2 from 101.6 in June.
The cautious rise in confidence of consumers, who drive two thirds of the American economy, was matched by a modest pick-up in US retail sales.
The US Department of Commerce reported that June retail sales were up 0.2 per cent to a seasonally adjusted $292.9 billion (#343.9 billion). Significantly, it also revised May sales upwards from a 0.1 per cent increase to 0.4 per cent.
The most important component was a surge in new car sales which account for a quarter of retail activity. Helped by steep discounts, these climbed 1.5 per cent to $72.88 billion following a 0.2 per cent gain in May.
The downside was that excluding autos, overall retail sales fell 0.2 per cent in June, the first such decline in three months. But sales of electronics and appliances rose 1.1 per cent in June after being flat in May.
Perhaps the most important news yesterday for the market was that prices paid to US manufacturers fell in June at the sharpest rate for over two years, removing any danger of rising inflation and leaving the way open for Mr Greenspan to lower interest rates again at the next Federal Reserve meeting on August 20th. The 0.4 per cent drop in wholesale prices left inflation rising at an annual rate of 2.4 per cent in the first six months of this year, much better than last year's 3.6 per cent.
The last decline in the Producer Price Index of this magnitude was in February 1999 and the last fall of any kind was 11 months ago. The main factor was a 2.5 per cent plunge in energy costs.
The sharp slowdown in the US economy has eased inflationary pressures as wage demands soften.
The economy grew at only 1.2 per cent in the first quarter and analysts expect that growth in the April-June period will fall further to around 0.5 per cent.
