As Chrysler seemed close to bounding out of bankruptcy and General Motors limped into Chapter 11, data continued to suggest that the declining U.S. economy is at least not in free fall. Take-two of first-quarter GDP showed a decline of 5.7 percent rather than the “advance” figure of -6.1 percent. The Reuters/University of Michigan Index of Consumer Sentiment rose to 68.7 in May from 65.1 in April and 57.3 in March. Online job demand rose 250,000 to 3,367,000 vacancies in May, according to the Conference Board. The ISM Manufacturing Index edged up to 42.8 from 40.1, and the Credit Managers’ Index moved to 44.8 from 43.1.

But consumer spending was revised downward in the latest GDP estimate; most consumers in the Reuters/University of Michigan poll said their financial situation “had worsened primarily due to income declines, shorter work hours, and lost jobs,” and lower prices could not convince them to buy things; the ISM survey showed the manufacturing sector stagnating for the seventh month in a row; and the Credit Managers’ Index shows that the economy is “still in the contraction zone,” according to National Association of Credit Management economist Chris Kuehl. 

Then again, Keuhl says, the "trending is in the right direction.” And even though manufacturing looks sickly, Norbert Ore, chair of the ISM’s manufacturing business survey committee, pointed to signs of improvement: the new orders component rose in May for the first time since November 2007 and the overall economy grew following seven straight months of decline.

With several of the nation’s top banks raising billions of dollars in stock issues and showing eagerness to return their TARP money, and consumer spending not falling off the cliff, some positive thinking has returned. On the day the U.S. government became the 60 percent owner of GM, the Dow Jones Industrial Average jumped 221.11 points to settle at 8,721.44.

Still, it’s worth reviewing Treasury Secretary Tim Geithner’s remarks in China this past weekend. After painting a picture of possible stability—the “global recession seems to be losing force,” the “pace of decline in economic activity has slowed” in the U.S., “the financial system is starting to heal”—Geithner noted that these signs “represent only the first steps in laying the foundation for recovery. The process of repair and adjustment is going to take time.”

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