Tag Archives: GDP

Continued Recovery or Double Dip Recession?

Posted August 6, 2010 by admin. tags:Tags: , , ,
American Stock Exchange



Photo By Shutterstock 

Article take from Paragon Wealth Management 2nd Quarter Newsletter

Written By: Nathan White, Chief Investment Officer

During the second year of an economic recovery, the economic data in the first year of a recovery is strong because companies ramp up production to refill depleted inventory levels, and economic activity in general resumes. As the growth rates come down in the second year, it often coincides with the stock market taking a break as well.

Part of the reason the market did so well in 2009 was because it was rebounding off extreme oversold conditions that were unwarranted. Now the we have entered the second year after the recovery low, the economic dad is slowing down, which is contributing to the reasons for the recent market decline.

The big question now is whether or not the recovery will continue, and if so at what pace, or are we headed for the dreaded double-dip recession scenario so widely reported in the press?

GDP, Income Figures, Government Actions
First quarter real Gross Domestic Product (GDP) was recently revised downward to a 2.7 percent annual rate, which is pretty anemic for this stage in the recovery. This shows that the recovery is not as robust as in past recoveries especially considering how severe the recent recession was. The economic data currently coming out is showing a mixed picture-as is to be expected at this stage of a recovery.

The main reason for the downward revision of GDP was that personal consumption expenditures were adjusted down and this is a significant portion of the GDP figure. It is a possible sign that consumers are still very timid and might not be willing or able to spend. On the other hand, income data show that personal income rose 0.4 percent in May, and this figure has been up for seven straight months.

Increasing income figures strengthen the recovery as it eventually provides people with more money to spend or shore up their finances. However, continued high unemployment, approximately one million less jobs than a year ago, is offsetting the benefits that are coming from income growth. For the most part the economic data is coming in at about average for this stage in the economic cycle. We hoped for better numbers due to the severity of the last recession. A less robust recovery is due to the damage done by the last recession and may indicate that we have not cleared all of the ghosts out of the closet yet. 

Government actions have created a significant amount of uncertainty, which continues to hamper the recovery. The most positive figures coming from the economic data are the rise in productivity and corporate profits. These two data points have performed better than average, and in my view are the main support for the rally off the bear market lows.

The productivity data has enabled corporations to increase profits in the absence of significant increases in sales. I believe this is a significant positive factor for the market moving forward. If the recovery continues with even small increases in sales, it could considerably boost earnings. On the other hand, if the economy wanes high productivity along with current relatively strong balance sheets can serve to support earnings in the face of a condition in which they would normally fall. In the end, markets are moved by earnings. Even if we entered another recession, you could see corporate profits hold up relatively well, which would end up supporting equity prices.

Article to be continued next week…

Paragon Wealth
Management
 is a provider of managed portfolios for
individuals and institutions.  Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy.  All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice.  This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security.  Past performance is
not a guarantee of future results.

American Finances

Posted June 17, 2009 by admin. tags:Tags: , , ,
The National Debt Clock

Written by Nathan White, Paragon Chief Investment Officer

photo by agilitynut

There is currently a lot of talk about what the implications will be for all of the government involvement in the economy. To help put things into perspective I thought it would be good to take a look at the current condition of the country’s finances. I am not a doom and gloomer, but I think it is always helpful to know the facts in order to put things into perspective.

  • $56.4 Trillion – Current Liabilities and Unfunded Promises of the Unites States Government

This equates to $483,000 for every American household!

  • $11 Trillion – Current National Debt

         50% held by foreign countries and the other half held by the public

  • $1.7 Trillion – Projected 2009 Budget Deficit

The largest as a share of GDP since World War II

In order to service all of these liabilities the government will have to take more from the private sector which means slower economic growth than there otherwise would have been.

It does not mean that we wont grow (which is why I’m not a doom and gloomer!) but just that the growth will come at a slower pace on average.

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