Friday, January 6, 2012

Economy/Stock Market: Appetite For 2012

The stock market started the year with gains. No wonder, the news from the economic front made appetite for 2012.

Yesterday we learned that the engine of the U.S. economy, the consumer spending, is still running smoothly. "Many U.S. retailers are reporting solid sales gains for December, ending a decent holiday season", wrote Reuters ( Especially the luxury chain "Limited Brands" (the mother of "Victoria`s Secret"), up-market department store "Macy's" and teen retailer "The Buckle" posted strong revenue gains that beat analysts' estimates.

But not just the retail is doing well. The whole U.S. service sector, which includes banking, insurance, restaurants, traveling, health care and more, accelerated a bit in December (bloomberg). The Institute for Supply Management’s index (NAPMNMI) of non- manufacturing industries, which account for almost 90 percent of the economy, rose to 52.6 last month from 52 in November (numbers above 50.0 indicate expansion).

The growing consumer spending is fueled by the improvement of the labor market. The weekly jobless claims dropped to 372k, the lowest level since June 2008 (calculatedriskblog).

We also got encouraging news from the U.K. The british service industries grew at the fastest pace in five months in December, reported Bloomberg (bloomberg). The data suggest the U.K. economy strengthened in December after surveys earlier this week showed construction and manufacturing improved. These data strengthen the hope that Europe may escape the recession expected by the still gloomy majority of spectators, added Bloomberg.

These data suggest a solid start into 2012. As the pessimistic majority are still betting on doom & gloom the ongoing economic recovery could lead to a powerful rally on the stock market.

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