Sunday, August 2, 2009

What recession?

Present economic conditions in the United States from Ritholtz:

• Unemployment has risen;
• Wages continue to slide;
• Industrial production has fallen every month;
• Deflation continues to stalk many asset classes;
• Credit availability is weak, lending standards are tight;
• Capacity utilization is at a very low rate of 68%;
• Retail sales (other than gasoline price increases) are soft

As stated the economic bottom hasn't been hit, and growth has been returning although at a very sluggish rate. Credit is still tight, hence the lack of private sector growth. Government spending can temporary provide a cushion against additional downside but it can not continue its debt ridden balance sheet.

Wages will continue to be under pressure as demand has not returned to from the 2007 peak. Hence the increase in savings and tepid spending by the consumer.

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