Is This the End of the Beginning?

This week’s report that retail sales fell much less than the consensus estimate in February and the upward revision to the January sales figures raises the prospect that the worst of this recession may actually be behind us. While such a statement might seem surprising, it is generally consistent with our forecast, which has long noted that late 2008 and early 2009 would mark the darkest hours of this recession. Even if the worst is behind us, the economy still faces a long and arduous road to recovery.

To paraphrase Winston Churchill, this week’s improved retail sales figures, sharp decline in inventories, and positive bounce to the stock market do not likely mark the end of the recession, nor do they mark the beginning of the end. Perhaps, however, the apparent bottoming in retail sales combined with the sharp reduction in business inventories will mark the end of the beginning of this downturn.

January’s sharp upward revision to retail sales lifted the overall increase to 1.8 percent. This marks the first increase in overall retail sales in seven months and the largest increase since January 2006.