“While much of the sharp sell-off in stocks on Tuesday has been blamed on the Chinese stock market, there is also growing concern among investors that earnings growth going forward will be the weakest in nearly five years, since shortly after the end of the last recession in late 2001.” – CNNMoney.com, February 28 2007
Fourth-quarter gross domestic product (GDP) numbers were revised down to 2.2% yesterday from the government’s previous January announcement that our GDP had surged to 3.5%. According to CNNMoney.com, the lower growth is attributed to “sharply lower spending by businesses“.
In addition, durable goods orders “showed a 6.0 percent decline in new orders… excluding aircraft and defense spending.” According to CNNMoney.com “That reading is typically the clearest barometer of business spending. It was the largest such decline in three years and one of the biggest drops on record.”
Chicken Smith View:
If nothing else points to a coming recession, just realize that if companies are tightening up their spending, then there is less investment taking place in our economy. That, in turn, translates to lower sales, lower employment, and an overall decline to our already weakening economy. Add that to our increasing inflation as measured by the consumer price index (CPI), our current (and increasing) foreclosure rate, our drop in housing sales, the rise in consumer debt (credit cards, equity loans), and a whole slew of other factors (ie, inverted yield curve) that are pushing their limits on our increasingly taxed economy.