The news agencies are currently abuzz with praise and adoration for the 3.5% annualized GDP growth rate that was reported in the third quarter of 2009 by the Department of Commerce. The financial markets took this to be an indicator of future growth, and justification for the recent rally in values.
However, there is a very critical connection that has not been internalized into the market. This insight is based on the reported GDP that shows consumer spending making up 71% of Q3'09 economic output. It is no secret that consumer spending has been the backbone of most previous economic recoveries, but nobody is asking how the consumer can drive a recovery when unemployment is at 9.8%? Regardless of whether the consumer spending came from government financed subsidies or increased consumer debt, it is still a temporary 'bump' and not a sustained improvement in economic fundamentals.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment