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Reports show economy mending

WASHINGTON – July 30, 2009 – Economic indicators keep saying what investors have known for months: Things are getting better.

The latest government report to reinforce a more positive view of the economy’s health was the Federal Reserve’s “beige book,” released Wednesday, which indicated many parts of the nation are seeing economic stability. Earlier in the day, President Obama told spectators at a town hall meeting in Raleigh, N.C., “We may be seeing the beginning of the end of the recession.”

And the July update of the USA TODAY/IHS Global Insight Economic Outlook Index predicts the economy will grow October through December, the first increase since September 2008.

“The evidence (of recovery) is building every day,” says Jim Paulsen of Wells Capital Management. “It’s settling and gives people more faith in what they’ve seen” from stock and bond markets.

The reports echo what stock prices have been predicting since March. The Standard & Poor’s 500 index has soared 44 percent from its March 9 low, despite falling 0.5 percent Wednesday.

While the latest pieces of economic data provide some comfort, they by no means signal a return to the boom times. Economic experts say they still are on the watch for information about:

• Clues on when a meaningful recovery is firmly underway. The beige book indicated the economy is still far from robust, because five of the Fed’s 12 regions – Boston, Philadelphia, Richmond, Atlanta and Dallas – were “subdued” or “weak” and Minneapolis was faltering.

“There may be a bottom, but where’s the bounce?” says Doug Roberts of Channel Capital Research. “There’s still a significant level of weakness in the economy.”

• Signs of health in the commercial real estate market. The beige book sounded concerns about the demand for office buildings, retail space and manufacturing facilities, says John Canally of LPL Financial. The fact commercial real estate remains soft could be a sign that employment, too, will be weak until early 2010, he says.

• Evidence of the federal stimulus kicking in. Much of the future hinges on how stimulus spending steers the economy, Roberts says, which won’t be known until next year. Some additional clues, though, will be released this week with reports on jobless claims today and GDP on Friday.

“There’s a lot of information that supports the idea we’ve turned a corner,” Paulsen says. “But there’s still a lot of doubt.”