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I expect a volatile week
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I agree with economists who joined NABE panel.I think U.S. economy will likely avoid a recession but growth will slow to a crawl during the first half of this year.The equity prices will go up sharply in the second half of the year.The investors still lack of confidence the week and month ahead.
While credit availability is a constraint on the overall economy, I see a moderate tightening of lending to consumers and businesses. But I also expect credit market liquidity and functioning to be restored to normal by the end of this year.
The economists say that the stimulus package, signed into law earlier this month, with tax breaks for businesses and tax rebates worth up to $600 per individual and $1,200 per couple, could boost economic growth in the second half to a 2.8 percent annual rate.
That would bring growth for the year to 1.8 percent, still down significantly from the 2.6 percent growth projected in the prior survey taken in November.
About 40 percent of those surveyed said the fiscal stimulus package will help ward off a recession. Another 30 percent believe it will keep any recession short and mild and the remaining 30 percent polled believe the package will either have a negligible impact, is unnecessary, or is coming too late.
The NABE panel significantly trimmed its estimates for consumer spending and housing and cut the outlook for business inventory accumulation. The housing slump is likely to have a "major negative impact" on consumer spending this year, according to more than 60 percent of the economists polled.
New home starts are expected to total just 1.0 million units in 2008, down from the 1.2 million units projected in November and the 1.5 million units forecast as recently as last May.
For this week, I expect the good mood for banking industry to continue for a few days and then surrender to sell off pressures.The only sectors I am optimistic for this week is health care and telecom.
The long term problem is even if Ben S. Bernanke, George W. Bush and Congress win the battle to avert a recession this year, they risk losing the war to strengthen the economy for the long term.
Growth will get a boost in the second half of this year as consumers spend some of the $107 billion in tax rebates passed by Congress and signed by Bush this month. The U.S. may suffer a letdown afterward as the kick from the stimulus wears off, leaving the economy vulnerable to its underlying weaknesses: a retrenching financial industry, indebted consumers and slowing productivity growth. This is not a V-shaped event. It's a slow-growth scenario.
Fed officials see growth picking up to more than 2 percent next year as inflation ebbs to 2 percent or below. Fed Chairman Bernanke, 54, is slated to discuss the central bank's forecast in testimony to Congress Feb. 27 and 28.
So far, the Fed's deepest interest-rate cuts since 2001 haven't helped the financial markets or the economy. What they have caused is an increase in inflation expectations, with the price of gold soaring to a record $958.40 an ounce last week.
Consumers, until now the driving force behind the expansion, are feeling the squeeze. While households will get a short-term boost from the coming tax rebates from Washington, their longer-run finances look shakier.
The good thing there is lots of liquidity available and looking places to invest money.Therefore I am still optimistic for equity market. |
| Tarih
: 25.02.2008 |
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© 2006 Mert TOKER All Rights Reserved. |
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