Good news, bad news: how is the economy doing?

From Matt Yglesias, the good news:

First up, housing starts: "Privately-owned housing starts in January were at a seasonally adjusted annual rate of 699,000. This is 1.5 percent (±16.8%) above the revised December estimate of 689,000 and is 9.9 percent (±14.2%) above the January 2011 rate of 636,000." 

And new unemployment claims: "In the week ending February 11, the advance figure for seasonally adjusted initial claims was 348,000, a decrease of 13,000 from the previous week's revised figure of 361,000. The 4-week moving average was 365,250, a decrease of 1,750 from the previous week's revised average of 367,000." 

Again, none of this is like crazy insane boom times data. But it all reflects an economy converging on normalcy and I think it's plausible that we'll see convergence at an accelerating rate. The things to watch for are spikes in rents and gasoline prices. The Federal Reserve will have to hold its nerve through an inflation panic. I would invest in things that you think oil-exporting nations are likely to want to buy.

From Nouriel Roubini (a.k.a. "Dr. Doom"), the potentially bad news:

But at least four downside risks are likely to materialize this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets... ..the eurozone is in deep recession, especially in the periphery, but now also in the core economies, as the latest data show an output contraction in Germany and France. The credit crunch in the banking system is becoming more severe as banks deleverage by selling assets and rationing credit, exacerbating the downturn... In China, the economic slowdown under way is unmistakable. Export growth is down sharply, turning negative vis-à-vis the eurozone’s periphery. Import growth, a sign of future exports, has also fallen.  

...Elsewhere in Asia, Singapore’s economy shrank for the second time in three quarters at the end of 2011. India’s government predicts 6.9 percent annual GDP growth in 2012, which would be the lowest rate since 2009. Taiwan’s economy fell into a technical recession in the fourth quarter of 2011. South Korea’s economy grew at a mere 0.4 percnet in the same period—the slowest pace in two years—while Japan’s GDP contracted at a larger-than-expected 2.3 percent, as the yen’s strength weighed down exports. ...while U.S. data have been surprisingly encouraging, America’s growth momentum appears to be peaking. Fiscal tightening will escalate in 2012 and 2013, contributing to a slowdown, as will the expiration of tax benefits that boosted capital spending in 2011... Finally, geopolitical risks in the Middle East are rising, owing to the possibility of an Israeli military response to Iran’s nuclear ambitions. 

With so many risks in so many places, investors, not surprisingly, will eventually prize liquidity in their portfolios, while shunning riskier fixed assets again when these tail risks materialize. That is yet another reason to believe that the global economy remains far from achieving a balanced and sustainable recovery. 

Who to believe? I have no idea.