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?
I expect Federal spending on defense and infrastructure, and state and local infrastructure spending to be leading sectors. Non-residential structural, equipment spending, and housing will be lagging sectors. Consumer spending should grow in line with income. Uncertainties mostly reflected in continued inventory liquidation.
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 should gain 3-5% in 2002, held down by strong dollar and high labor compensation. Investors must be looking to 2003.
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?
Consumer spending likely to grow about 1.6%, the slowest rate in many years and much more slowly than in 2000. Expenditures on housing likely to decline slightly in 2002 vs. 2001.
Copyright 2001, Bloomberg L.P.
