Friday, October 28, 2011

Still No Sign of Recession

The Lehmann Letter (SM)

Yesterday the Commerce Department reported 2.5% third-quarter GDP growth:

Some fear that we are slipping into or will soon slip into recession. But recession has not begun as long as GDP – the total output of goods and services - continues to advance.

This letter believes we will avoid recession as the economy continues to slowly improve. Unfortunately “slowly” is the key word. Rapid progress can’t occur until residential construction, motor vehicles and other durables hasten their improvement. And that won’t happen until household balance sheets recover: Liquidity rises, asset prices grow, debt falls and net worth improves. So far no one has explained how all that will happen.

© 2011 Michael B. Lehmann

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