People aren’t spending money like they used to. Unemployment is still near double digits. And the housing market is still shaky. So the future looks bleak for the economy, right? Not necessarily.
A handful of surprisingly good earnings reports Thursday suggested that some of the major U.S. companies that make things and move them around — including Caterpillar, 3M and UPS — could lead the way to an economic recovery.
It would be an unusual path back to better times. Consumer spending and housing usually lead the way.
But all three of those economic bellwethers, plus AT&T and Union Pacific railroad, indicated business was picking up. And most said they expected it to get even stronger this year.
Peter Buchanan, a senior economist at CIBC World Markets, said executives have taken pains lately not to raise hopes too high for big profits in future quarters. That spread fear among investors that the economy might stall.
But he says earnings results from UPS and Union Pacific should help ease such worries.
“If you’re moving stuff, it’s a broad indicator covering spending by both businesses and consumers,” Buchanan said. “Companies are erring on the side of caution in their forecasts . . . but on the ground, the real results don’t look so bad.”
As the economy struggles to mount a lasting recovery, Wall Street has been looking for evidence that companies are pulling in more money — not just increasing profits by cutting costs.
The big question is whether companies will stop hoarding cash and start spending more to expand their operations and hire freely.
