WHAT GOES UP….
Two of the primary drivers of the economic recovery are now becoming headwinds. In an interview on CNBC yesterday Jan Hatzius of Goldman Sachs described why he is more bearish than the consensus. His primary concerns are the inventory and stimulus headwinds. In a similar strategy note UniCredit expressed the same concerns and provided some more detail. They believe these two trends alone could shave 6 to 7 points from GDP:
“Our expectation of a significant growth slowdown is largely based on the assumption that the growth at the end of 2009/ beginning of 2010 was supported primarily by temporary factors, whose contribution will not only decline in the course of this year but is even likely to become negative. As the following chart illustrates, the fiscal program (American Recovery and Reinvestment Act) and private inventories added roughly 5 percentage points to growth in both the fourth quarter of 2009 and the first quarter of 2010. In the spring, this contribution already dwindled to half a percentage point, and in the second half of 2010 as well as 2011 both components are likely to shave roughly 1½pp off growth. The swing is, therefore, a considerable six to seven percentage points.”
Here’s hoping for a consumer recovery in 2011….Unfortunately, we probably shouldn’t count on it.
Source: UniCredit
u mean the new bullet train from LA to lost wages(vegas) is not going to save us?
mass transit will save the planet….but not harry’s seat.
Agree about the consumer recovery? I know that anecdotes are the lazy man’s research, but really, does anyone know anyone getting raises lately, unless of course you work for a public sector union, or are at the top tier levels of Wall Street? There are a few people who never spent more than they had during the credit boom, and they’re still spending. But try as I might, and I’d really like to be optimistic about the consumer in 2011, but can you really see a scenario that brings the consumer back in a strong manner? Given that outlook, is it even remotely possible to be bullish on the economy, and thus ultimately, the stock market long term?
We can’t possibly have a consumer recovery in 2011 because we have 20% real unemployment. Add to that the fact that Obama and the liberals are attacking businesses on many fronts and destroying jobs much faster than our economy can create them. The people on this blog are traders. How many of you have worked in any other business? Porter Stansberry recently wrote a letter detailing exactly why no one in business will be hiring soon. TPC that would be another great post.