This is a recent Blog posting by Alan Beaulieu from ITR. Good read.
I have been reading various headlines and articles announcing a near-term softening and potential swoon in the U.S. economy. Other news pieces have dealt with the decline in oil prices, and others with Japan’s in aggressive quantitative easing. There is no lack of economic news; the problem is what does it all mean?
The U.S. economy is going to shift to the backside of the business cycle, but not yet. The latest input from the US Leading Indicator, put out by the Conference Board, did indeed fall in March. Remember that this is a leading indicator, and the downside pressure applies to later this year – not now.
Oil prices have slid of late, which may be good news for consumers. I said “may be” because gasoline prices tend to be sticky on the way down, In addition, OPEC is thinking about holding a special meeting to discuss the recent decline in prices. The topic of discussion will of course be the reduction in the world’s oil supply. Their power is not quite what it used to be given the increased oil output in the U.S.
Japan is looking to jump-start their economy through exports. The massive quantitative easing is officially not currency manipulation, but in effect that is exactly what it is. A cheaper yen means more exports out of Japan and therefore a boost to their domestic economy. This is bad news for firms competing against Japanese products.
Looking through all the recent economic activity, we conclude that the US is still on track for a mild recession, just not yet.