As the festive season draws nearer, the US economy has resurrected with a wave of unexpectedly good economic data suggesting that it will have some of the fastest and strongest growth since the recovery started in 2009, causing a surge in the stock markets. This rise from the grave has revived the hopes of economists, investors and policy makers. But some economists have stuck out their necks in exclaiming that the better-than-expected data’s are due to temporary factors and not permanent ones. Investors are dumbfounded at the moment-Who are they going to trust?

A broad range of data in recent weeks like reports on new residential construction and small business confidence, have beaten analysts expectations. Unemployment Claims-often providing the early indication of where the labor market is heading-has dropped to their lowest level since May 2008 (the latest being the drop from 368K to 364K yesterday). Prominent economists have also professed the economy is growing three to four times as quickly as it was early in the year, at an annual pace of about 3.7%.

When one school of thought has showered positive vibes for the US economy, the other school of thought have warned that the economy has not reached the golden days yet. Many forecasters say the recent uptick probably does not represent the long-awaited start to a strong, sustainable recovery. They attribute the recent strengthening to temporary factors. The renewed pessimism is outlined by two factors. Firstly, economists opine temporary trends increased growth in the fourth quarter and may not continue into the next year. Secondly, the economy faces significant headwinds in 2012 i.e. the lingering sovereign debt crisis in Europe and some from domestic cutbacks beyond the control of President Obama, whose campaign would like to point to a brightening economic picture, not a darkening one.

The fourth quarter benefitted from wholesale restocking of goods like petroleum, paper and cars, giving a spur for growth. Consumers also pulled back on their savings, helping to finance a recent spurt in spending, a trend that forecasters doubt will continue. Other factors include falling gasoline and commodity prices, and an increase in orders from Japanese companies returning to business after the devastating tsunami in early 2011.

The US economy is on the crossroads yet again, with economists divided on whether the economy has overturned the downslide or not. Only time will decide-which school of thought will be correct in their endeavor? For now, let’s enjoy the festive season with renewed hope and enthusiasm.

Merry Christmas Readers!