WASHINGTON — A flurry of better-than-expected bank earnings reports this week, coupled with some tentatively encouraging economic data, suggest the economy and the financial system might not be quite as sick as many had believed.
Or are they? Facing conflicting evidence, analysts are wrestling with whether the economy is making a fitful climb back up — or whether the crisis will get worse before it gets better.
“We’re beginning to get a little visibility on how banged up corporate America has been,” Mark Vitner, senior economist at Wachovia Corp., said of Friday’s earnings reports from Citigroup Inc. and General Electric Co.
But the better-than-anticipated results from the banking giant and the diversified manufacturer — among the most beleaguered companies in their industries — buttress the notion “that just maybe we can see some light at the end of the tunnel now,” said Vitner, who anticipates an end to the recession toward year’s end but continued high unemployment well into 2010.
Citigroup lost money in the first quarter and General Electric’s profits fell, but both beat Wall Street’s expectations. Their financial performance is being closely dissected for signposts of where the economy might be heading.
Citigroup, which has been the weakest of the large U.S. banks, reported its smallest loss since 2007. GE said its first-quarter earnings fell 36 percent on sharply lower profits at its troubled finance arm. “We’ve come from a period where people thought the world was going to end to a period that is a little better,” Keith Sherin, GE’s chief financial officer, told analysts in a conference call. “I think today you look and there are some signs in the economy that are a little better.”
The number of Americans receiving unemployment benefits has surpassed 6 million for the first time while housing construction unexpectedly plunged in March. Still, those reports carried some silver linings, namely a second consecutive drop in new unemployment claims and some stability in new single-family homes.
Earnings
