RSSRecession? Maybe not
 | Seed Newsvine |
The risk of deep inventory cuts over the rest of the year has been significantly lowered but at the expense of probably reducing GDP growth during the winter quarter from 0.6% to 0.3-0.4%.
Other reports are consistent with this and also suggest that the low point in this economic downturn may be behind us. Weekly job layoffs, initial unemployment claims, have now steadied at a level below the worst periods in the first quarter. This probably means that employers’ expectations for the rest of the year, while grim compared to a year ago, have stopped worsening. Chain store sales were up 3.6% from a year ago in April, the highest in many months. This should be interpreted as evidence of both more cash and more confidence than consumers were expected to have. The value of April nonresidential construction starts just reported by Reed Construction Data was at the 4th Q 2007 level, suggesting that the slowing in the market is gradual and orderly and does not include the panic cancellation characteristic of the end of the building cycle.
Investors are apparently reading their crystal balls the same way based on the up trend in stock indexes in the last two months.
If the economy manages to avoid a drop in GDP in the first half of 2008, there will be nothing to bounce back from in the second half. So the whole year will be a depressed market with construction spending stuck at the current depressed level until late in the yea .when the necessary inventory cuts have been completed. But the resolution of the inventory problems will come sooner than recently thought, putting the economy and construction on a clear upward track as the year ends.
