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A Slowdown, Yes . . . A Double-Dip Recession, No!

05/26/2011

Today’s report on first quarter GDP growth was disappointing, coming in at 1.8% compared to an expected growth of 2.2%.  Of course, 2.2% shows expectations were already low.  This is not news.  The real question is what will GDP growth be during the current quarter.  My reading of it is that the economy is continuing to slow.  Supporting this belief, today’s release of weekly jobless claims was surprisingly high.   Since the stock market is a leading economic indicator (historically leading about 6 months), the lackluster stock market performance currently suggests a lackluster economy will continue.

How worried am I about this?  Very little, as the economy did grow reasonably last year, and there is an enormous amount of uncertainty right now, i.e., about the debt ceiling, about income tax rates, about municipal cut-backs, etc.  This is a slowdown, not even a garden-variety recession.

My only long-term concern remains the under-regulated derivatives market, which could cripple the financial system quite suddenly.  And, we all remember a financial crisis is far worse than any garden-variety recession.

So, relax . . . enjoy the summer . . . and slow down, just like the economy!

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