It is an economic world of mixed messages at present. U.S. job losses in May were about half of what they were at their worst in January 2009. The latest weekly jobless insurance claims figure continued a trend that has been stepping down for several months. For June 6th, it was 601,000 versus 674,000 at its peak in March. But labor markets will continue to come under duress as a result of the bankruptcy filings of Chrysler and General Motors and the shock waves that will ripple out over parts makers and dealerships.

North America's stock markets are showing initial signs of bounce-back. There is increasing confidence that China's domestic economy is expanding and that recovery in the U.S. will begin in the fall or early winter. Major banks have received approval to repay government money that they received under TARP. This is a further indication of improving capital markets. The greater willingness to accept risk on the part of investors is also being manifested in the decline in value of the U.S. dollar. Its role as a haven of last resort is being diminished.

Implications for the Greenback, Commodity Prices and Stock Market Indices

However, this has implications for other areas of the economy. Rates on long-term U.S. treasury bonds have had to rise to meet sales targets. And the falling greenback, along with expectations about renewed growth ahead, has meant some commodity price increases. Notably, the international price of oil has doubled from its low point of $35 USD per barrel in February to above $70 at present.

The improved prospects for raw material prices are a prime reason that the Toronto Stock Exchange index jumped 11% between its April and May month-end closings. As for the three major U.S. indices, they are each about equal percentages (+ and — 33%) above and below their 52-week lows of March 2009 and their 52-week highs of June 2008. They are still way down (i.e., close to -40%) versus their latest cyclical peaks of October 2007.(story continued below)

Sources: New York Stock Exchange (NYSE), Standard and Poor's (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Table: Reed Construction Data — CanaData.

Performances of Key Stock Market Indices Over the Last 12 Months-
May 29, 2009

*Each month's closing figure versus the May 30, 2008 closing figure for the index.
The Key Stock Market Indices are:
1) New York Stock Exchange — Dow-Jones Industrials (30);
2) New York Stock Exchange — Standard and Poor's (S & P) (500);
3) National Association of Securities Dealers Automated Quotations — NASDAQ Composite Index;
4) Toronto Stock Exchange — S & P/TSX Composite.

Data sources: New York Stock Exchange (NYSE), Standard and Poor's (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Chart: Reed Construction Data — CanaData.

S & P/TSX Composite
Toronto Stock Exchange

New York Stock Exchange
Dow-Jones Industrials (30)

New York Stock Exchange
Standard and Poors (500)

NASDAQ Composite Index
(National Association of Securities Dealers Automated Quotations)

The charts show month-end closing figures.

Data sources: New York Stock Exchange (NYSE), Standard and Poor's (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Charts: Reed Construction Data — CanaData.

U.S. Retail Sales for May

Add to this stew, the latest U.S. retail sales figures. Consumer spending accounts for 70% of the nation's Gross Domestic Product (GDP). On a month-to-month basis, retail sales grew 0.5% in May. On a year-over-year three-month-moving-average basis, they have stabilized at about -10%. Furthermore, auto sector sales have been gradually creeping up from very depressed levels (-25% year over year "smoothed") for six months now.

Only Government is Spending with Abandon

Banks, businesses and consumers are cleaning up their finances. The consequent de-leveraging in lending and spending will prolong the recovery phase. In a perhaps appropriate response to challenging circumstances, the one sector of the economy that has shifted to profligacy is government.

The irony is that it is government that usually preaches restraint. Not just in the months ahead, but more importantly in a year or two, it will be determined whether or not public sector spending is exceeding the bounds of good judgement.

U.S. Retail Sales — Three Months Smoothed

*"Year over year" is each month versus the same month of the previous year.
Based on latest three-month averages of current dollar adjusted data (and placed in latest month).
Adjustments are for seasonal variation, holiday and trading day differences, but not for price changes.

Data source: U.S. Census Bureau (Department of Commerce).
Chart: Reed Construction Data - CanaData.

U.S. Construction-related Retail Sales — Three Months Smoothed

*"Year over year" is each month versus the same month of the previous year.
Based on latest three-month averages of current dollar adjusted data (and placed in latest month).
Adjustments are for seasonal variation, holiday and trading day differences, but not for price changes.

Data source: U.S. Census Bureau (Department of Commerce).
Chart: Reed Construction Data - CanaData.