Monday, October 12, 2009

News That Doesn't Depress You: Recovery May Be Stronger Than Forecast Says FedEx Economist

The Journal of Commerce Online reports that Gene Huang, the chief economist with FedEx, thinks the economy is in recovery and could easily hit 3% GDP growth next year. This exceeds the 2.4% consensus forecast. Based on Huang, Morgan Stanley analyst, William Greene advised investors that the concensus was "far too conservative."

While he believes the economy will exceed current expectations, Huang does worry that consumer angst may slow growth below the average recession recovery rate of 5.4%. Consumer recalcitrance may even lead to a "W" shaped recession. Counterbalancing that potential is the stock market's recovery, which to date has restored $4 trillion of household wealth.

Worried about the economy, consumers have increased the savings rate to 4%. This is resulting in $400 billion of increased household wealth each year. Thus, consumers have the wealth to spend. If they regain the confidence to spend, growth would be robust.

Whatever the initial cause(s), it appears that any continuation of the recession or economic anemia moving forward is a crisis of confidence more than cause.

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