Of beige shoots and broken branches

April 15, 2009

Ben Bernanke has taken some flack for his argument that “green shoots” of economic activity might lurk around the corner. In one such swipe, Justin Fox of Time Magazine argued that the metaphor is flawed because what we’re really talking about is a moderation of contraction, not growth.

Today’s Beige Book, a collection of anecdotal economic evidence compiled by the Fed, showed only a few very faint positive signs. On housing, the report said the “number of potential buyers” was rising — not exactly a sure sign of a bottom.

But at least the New York Fed’s regional factory data suggested that the Fed chief’s green shoots might just see the light of day. Again, it was mostly a story about lesser deterioration, but an improvement nonetheless. Apart from a much better than expected reading on the overall index (which is still, it must be noted, at -14.65), there was a huge rise in the new orders index (Also still negative, but now at -3.88, from -44.76).

Even better readings in the six month outlook, including expectations for an outright increase in aggregate hours worked, suggested sentiment was also on the mend — an important part of any recovery. Granted, New York is hardly a manufacturing center, and the slower decline has yet to be replicated nationwide. Indeed, industrial output cratered a staggering 20 percent in the first quarter. Nonetheless, if Bernanke is digging for the roots of recovery, he will take heart in this bit of goods news from the Big Apple.

Photo: Workers plant a seedling at the edge of Maowusu Desert in Lingwu, Ningxia Hui Autonomous Region April 24,2007. REUTERS/Jason Lee (CHINA)

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