Is the economic contraction peaking?

Advertisement

I believe we may be seeing the bottom here. Marc Chandler of Brown Brothers Harriman does as well. Here is what he has to say:

Related Posts
1 of 1,546

Our baseline expectation is that the pace of contraction of the US economy probably peaked in the horrific fourth quarter of last year, which still appears subject to downward revisions. We expect a deep contraction in Q1 09 but at a slower pace. Today’s data will likely support our general view.

The consensus calls for durable goods orders to be off around 2.5% at the headline rate and 2% lower on the ex-transportation basis. The average monthly decline in Q4 08 was -5.9% and 4.5% respectively. If the consensus is right, than the monthly decline in Q1 is running near 3% and 2.5% respectively.

A similar story may be evident in the new home sales report. The average monthly decline in Q4 08 was 7.7%. The consensus calls for a 3% decline and that would bring the average for the Jan-Feb period to about -6.7%.

Recall that existing home sales and housing starts reports surprised on the upside. Mortgage rates are falling, with the help of the Fed’s efforts and prices are still
falling as well.

The view that economic decline is now peaking does not preclude a so-called double-dip scenario like the one we saw in 1982. In my view, the rate of increase of unemployment will be key to determining if we have reached bottom.

Get real time updates directly on you device, subscribe now.

Do NOT follow this link or you will be banned from the site!