Economy slowed, not stalled
The US gross domestic product grew only 2.2 percent last quarter.
from the March 1, 2007 edition
Page 2 of 3
The negative economic reports come on the heels of some recession warnings. Former Fed Chairman Alan Greenspan, speaking Monday in Hong Kong, noted that corporate profit margins were starting to shrink – a possible sign of the end of a business cycle. As the business cycle ends, he cautioned, the US economy could be moving closer to a recession, perhaps by year's end.
A recession by year's end or early in 2008 is a scenario that makes sense to Hugh Moore of Guerite Advisors in Greenville, S.C. He has been bearish on the economy and the stock market for some time, saying the determining factor will be the "popping asset bubble" in the real estate market. "It will take away a lot of the impetus for consumer spending," says Mr. Moore.
Only a 'soft spot' in business cycle?
Other Wall Street advisers, however, are more sanguine. Jeff Kleintop, chief investment strategist at PNC Wealth Management in Philadelphia, notes that Mr. Greenspan had also predicted a downturn in 1995. "We had another five years of economic expansion," says Mr. Kleintop.
Kleintop, who has been bullish on the markets and the economy, sees several years of life left to the current business cycle. "We are at the midpoint of the expansion," he asserts. "We are just having a soft spot."
Despite the downturn in housing and durable goods, some other sectors – such as information technology, telecommunications, and nonresidential construction – continue to perform well, says Richard DeKaser, chief economist at National City Corp. in Cleveland.
"Whenever you get this kind of moderate growth, you end up with a mixed bag, with some sectors performing well and others poorly," he says.
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