Monday, January 28, 2008

Recession? Uh-Uh

Finally. Someone saying exactly what I keep telling people, except backing it up with numbers! :)

A great piece in today's Wall Street Journal discussing why the chances of a recession are extremely low, and showing just how well the economy is actually doing. Excerpts:
With housing so weak, the recent softness in production and durable goods orders is understandable. But housing is now a small share of GDP (4.5%). And it has fallen so much already that it is highly unlikely to drive the economy into recession all by itself. Exports are 12% of the economy, and are growing at a 13.6% rate. The boom in exports is overwhelming the loss from housing. ...

Models based on recent monetary and tax policy suggest real GDP will grow at a 3% to 3.5% rate in 2008, while the probability of recession this year is 10%. This was true before recent rate cuts and stimulus packages. Now that the Fed has cut interest rates by 175 basis points, the odds of a huge surge in growth later in 2008 have grown. The biggest threat to the economy is still inflation, not recession.
I also like how he ends with "Warren Buffett is buying."