Andrew WhiteLots of economic pundits are arguing over how the US economy will evolve in the next year or three. As a budding market watcher, and like anyone else with a degree in economics, one feel one has to have a point of view. So this is mine: I believe it more likely that the US economy will see a double dip recession; and not either a quick boom, or a slow, grinding recovery.
Data points backing up my view:
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Apparent demand in the economy today is based on a) re-stocking of inventory that was depleted early on in the recession, and b) government funded investments, and not industrial driven growth
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Consumer spend remains down, falling, and at best, flat
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Those firms at the “raw material” end of the global supply chain continue to see poor demand, and report falling demand; recent reports show that the Baltic Dry Index is falling again – which is a weak signal that global demand for the largest capacity freight is not recovering consistently
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Most firms across the economy that report “profit” confirm that the primary enabler to this profile is from cost cutting, not from revenue growth – no economic growth comes from cost cutting alone
So my personal opinion, for the three Economist scenarios (U, V, or W for Recovery, August 20th, 2009), are as follows:
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U – Grinding Recover – .6/10
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V – Fast rebound – 1/10
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W – double dip – 3/10
And the “W” chance is increasing, with the “U” chance slipping. This pressure will continue until and if investments and policies from Capital Hill address business growth, not re-allocation of (less) income to weaker parts of the economy. I am a believer of “equal opportunity”, not “equality of outcome”.
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