Thursday, July 24, 2008

Wesbury - 3% Growth in the 2nd Quarter

As I pointed out in my last market update, despite all the bad news out there, the economy is not in recession and the 2nd quarter was likely much better than expected. We'll find out next week, but in the meantime, here's what Brian Wesbury has to say:

Late next week the government will release initial estimates of real economic activity in the second quarter. Not long ago, in early April, when the quarter was just beginning, the consensus forecast for Q2 2008 real GDP growth was 0.0%, with as many economists predicting contraction as were predicting growth.

Now, three months later, the consensus is up to 2.2%. And no surprise - we are forecasting a 3% growth rate, more bullish than almost any other economist. Yes, it is true that the home building and autos sectors have been hammered. But, it is not true that this weakness has spread. Outside those sectors, the economy is not just healthy but downright strong, reflecting relatively low tax rates and loose monetary policy......

Many say it feels like a recession and predict negative growth. Then the data arrive, and show growth. The pessimists then say it doesn’t matter because it’s “old” news. After all, the quarter is already over and the evidence of recession will be clear by next quarter, they say.

Eventually, those forecasting recession are going to run out of time. The clock is already ticking and the economy remains resilient. Construction and auto related layoffs account for more than all the job losses in the past year. Initial unemployment claims remain below 400,000 and the financial sector appears to be bottoming.

I have said consistently since the credit problems started last year that this would not produce a recession and so far, I've been right. It's been extremely frustrating to be right about the economy and watch the stock market take a dive, but eventually the stock market will respond to the positive economic data.

1 comment: said...

Thanks for the info, I think it will be helpfull for me and my business plans that I have for the neer future.
Good luck.