Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
US Economy: Recovery not just around the corner - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • May 2, 2001

    US Economy: Recovery not just around the corner

    The GDP growth figures for the US economy released recently indicated a growth of 2% for the first quarter of the fiscal 2002. Many feel that this could be the first sign of a recovery or at least an indication that economy may just avoid a recession. The GDP growth figure is up from 1% in the fourth quarter of fiscal 2001.

    The growth in the economy was on the back of a strong consumer spending, which accounts for two-thirds of the U.S. economy. While the consumer confidence index had shown a downward trend for the first two months of the quarter for the month of March it had shot up to a level of 116.9. But the figures released for the month of April indicate a drop again. The index now stands at 109.2. According the Commerce department consumer spending and personal incomes rose in the month of March.

    The University of Michigan's April final consumer sentiment index, which measures consumers' attitudes about the economy, fell to 88.4 in from 91.5 in March. The preliminary reading two weeks ago, before the Fed made its fourth rate cut, came in at 87.8.

    The main culprits for the weakening of the consumer confidence index are a deteriorating business scenario and a less-favorable job market. With companies cutting thousands of jobs in recent months, the job market has weakened substantially and consumer confidence has been taking a hit. This is due to the fact that the employment sector has been shrinking faster than the manufacturing sector.

    The number of new jobless claims has risen to a five-year high figure. According to the U.S. Labor Department stood at 4,08,000 in the week ended April 21 up from a figure of 3,90,000 in the previous week.

    If the trend of weakness in the job markets continue the US economy may not be able to sustain growths as seen in the first quarter.

    Meanwhile the manufacturing sector continued to shrink but for April the rate of shrinking was slightly lower than that seen for March. The National Association of Purchasing Management's (NAPM’s) key index of manufacturing activity rose to 43.2 in April from a reading of 43.1 in the previous month, the NAPM said. In terms of the rate of decline, the worst might probably be over. The declaration of the economy might be slowing down. The other data that gave support to the belief included inventory reductions and lower prices for materials. The rate of new orders also shrank at a slower rate than in March.

    The NAPM index is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 industrial companies. A reading below 50 indicates a shrinking manufacturing sector; a reading below 42.7 percent points to a contraction in the overall economy.

    The employment should pick up as the economic slowdown decelerates, this would in turn increase consumer spending. However, volatile energy costs could hamper a recovery in the second half, especially if a rise in gasoline prices dampens consumer spending and energy shortages raise prices manufacturers pay.

    As the uncertainly looms large the Indian software industry’s valuations seem to sway correspondingly. Meanwhile, Indian software companies one after the other seem to be feeling the heat of the US economic slowdown. Nasscom has already lowered its projections for the growth of software exports. The growth earlier projected at 52% was lowered to 40-45% in mid April. But the question now is will the Nasscom numbers hold?



    Equitymaster requests your view! Post a comment on "US Economy: Recovery not just around the corner". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms