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Cheer Up, Economy!

Posted by: Ben Steverman on February 4, 2008

Feeling depressed about the economy? Let’s latch onto some reasons to be optimistic, courtesy of Marc Chandler of Brown Brothers Harriman:
“There is no doubt that the U.S. economy has slowed down,” but “it is still too early to assume the U.S. economy is contracting.”
Growth in the fourth quarter gross domestic product was recently reported at 0.6% in a preliminary estimate. Sure, that sounds bad, but the advance report is “notoriously unreliable,” Chandler wrote. Chandler points out that 25% of the required data for the final GDP number isn’t available yet at all, and another 30% of the measure is based on partial data.
Last week’s employment report, showing non-farm payrolls fell 17,000 in January, is also subject to revisions.
How long until we know for sure that the economy is, or isn’t, heading for a recession? Chandler suggests we won’t really know “until the end of February or early March when [fourth-quarter] GDP is revised and we get a new reading of the labor market.”
And by then, the economy might be warming up again. As Chandler writes, “the aggressive monetary stimulus and fiscal stimulus in the pipeline should underpin the economy by the greenshoots of spring.”
So here’s to hoping the economy isn’t bad as it looks, and that significant help is on the way.
Think happy thoughts. Think happy thoughts. Think happy thoughts.

UPDATE: It took less than a day for my attempts at optimism to fall flat. We woke up Tuesday to find that the ISM nonmanufacturing business activity index fell below the key mark of 50, dropping all the way from 54.4 in December to 41.9 in January. The “dire reading” … “portrays the emergence of recession-like conditions in the economy,” Bear Stearns chief economist said.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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