My view for months has been that the economy will be in recovery
mode over most of Half 2 ' 09, with July either the transition or
turnaround month. The leading indicator sets I follow suggest a
strong initial bounce for the economy, with industrial output up by
as much 6.5% from mid -year levels through early 2010. I would
also expect to see profits recover sharply from depressed levels.
Ironically enough, my longer range economic leading indicators rose
to the strongest level in many years last autumn, just as the economy
fell off the cliff. The longer term indicators -- liquidity and interest
rate measures plus the real wage and the oil price -- remain positive,
although the unusually strong rebound of the oil price has brought
the composite below truly exceptional levels. For now, 2010 looks
like a solid recvovery year, although a continued strong uptrend in
oil and other commodities composites would prove problematic.
The main issue of concern near term is liquidity preference and debt
minimization evidenced in reaction to the deep economic decline. We
will indeed need to see consumers loosen up and spend more freely
to regain solid footing and to start refilling depleted inventory
pipelines.
The US economy is in a deep hole presently when measured by such
key cyclical indicators as residential construction, real retail sales,
industrial production and unemployment. Business investment has
tailed off to the point where production capacity is now down 0.5%
yr / yr. On balance, the cyclical side of the US economy is right at
a depression level, and it will take several years of solid growth to
bring it back to prior peaks. In a volatile and uncertain global
climate, such a straight forward run back up and through the old
peaks is far from assured.
No comments:
Post a Comment