IN THE past few weeks I have seen something in shop windows that I haven't seen for years - "staff wanted" signs.
I'm not talking about one or two but several that have been put up. Some are with bars, cafes and restaurants, the others with retail stores.
The appearance of such signs points to growing consumer activity and confidence.
However, such confidence is not yet showing up in official statistics. A Westpac McDermott Miller Consumer Confidence Index report in March saw the index fall from 114.7 to 116.9 for the quarter.
The only part of the survey to show improvement was consumers' assessment of whether now was a good time to buy a major household item, with 21 per cent saying "yes".
Consumer confidence at its current level is consistent with a steady, but unspectacular, recovery in consumer spending.
In United States where the sharemarket has been performing very well for some time, consumer stats were up in March.
This has been spurred by improving job availability and stabilising house prices.
The Conference Board's confidence index rose to 52.5, exceeding expectations.
"With signs of improvement in the labour market, confidence is more likely to be up than down in the next few months," said James O'Sullivan, chief economist at MF Global in New York.
If consumer confidence is improving, then the economy should pick up, corporate results will improve and share prices will go up.
Rising interest rates could be a dampener, however, with the Reserve Bank in this country expected to move a number of times over several months, starting from June.
Tax changes such as an increase in GST could also trim people's spending, so all eyes will be on the Budget in May.
Back in the US, economist John Makin still sees structural problems with the economy.
"The problem with the sustainability of growth in the United States is straightforward. Massive stimulus, both fiscal and monetary, was responsible for virtually all of the 4 per cent annualised growth during the second half of 2009. Moving ahead into 2010, fiscal stimulus will turn to fiscal drag at mid-year."
His point is that, once government and central bank cut back on their efforts to stimulate the economy and markets, the real economy has to take over.
Unless businesses are making money and expect to make more in the future, they are not going to invest in growth or take on new staff. The end result is an economy that is sluggish or even in decline.
China has the opposite problem where the economy is growing too quickly and there are fears of investment bubbles and rampant inflation.
Chinese authorities came forward with a surprise increase in reserve requirements by 0.5 per cent on February 12, shortly before the start of the Chinese New Year holidays.
This suggests that Chinese policymakers are concerned enough about inflation to give a tightening signal earlier than most observers had expected.
So, despite initially positive signs, it is still too soon to rule that the world economy and markets are back to normal.
The underlying message is that economic growth and financial markets remain too fragile to tolerate much talk about removing stimulation policies.
As a result, markets must eventually reflect this reality.
David McEwen is Chief Investment Officer of Investment Research Group. View: www.irg.co.nz
Markets remaining on a knife edge
AdvertisementAdvertise with NZME.