How do you expect the coming recovery to shape up, especially in terms of its strength and the sectors that will lead and lag behind? How have you factored in the uncertainties surrounding terrorist activity and the war?
Slow liftoff as consumption and housing softness lags the end of the manufacturing industry down cycle. Business capital spending unlikely to pick up solidly until 2003. Terrorist activity and war holds back consumer and business spending.
The profits outlook is a crucial element in the recovery. What is your outlook for profits, and what factors will shape the profits recovery? Do your profit expectations square with those of investors?
Profits (S&P 500 operating) should turn positive year-over-year by Q3 of 2002. Perhaps Q2. Expectation is $45.50 in 2002 and $50 in 2003 (calendar years). This is probably below analysts bottom-up figure and probably more pessimistic than "investors".
Consumers will likely play a major role in the strength of the recovery. In the face of low savings, heavy debts, and sharply reduced wealth, how much can we expect households to contribute economic growth next year? And can we expect any contribution from housing?
Depressed growth in consumer spending next year is expected because of poor jobs climate and household reliquification of balance sheets. That is, increased saving, debt reduction, and asset accumulation is the cyclical process. Consumption to be up 1% to 2% and personal saving rate at 3.5% to 4%.
Copyright 2001, Bloomberg L.P.
