Too Soon to Be Looking for the End
Despite some weakness in recent indicators, there is still a lot of runway in front of the economy, says Morningstar's Bob Johnson.
The last month's worth of economic news has been mixed to downright hostile to my thesis of a strong recovery of 4.0%-4.5% growth for 2010. Retail sales have been weaker, employment growth slowed markedly, initial unemployment claims remain elevated, and this week brought news that housing starts fell meaningfully after the expiration of the housing credit. Is this a pause, an anomaly, or the start of a trip back into the abyss?
I Am Not Folding My Cards Just Yet
I continue to stick to my bullish point of view because of a strong manufacturing sector that continues to improve, falling prices in several categories, especially energy, and continuing improvement in the auto sector.
Inventories, too, are still way too low, in my opinion. I expect continued improvement in wage income, and I think dividend incomes could improve in the months ahead. We have been truly spoiled the past several months as almost every indicator has pointed in the same direction: up. Now with many indicators pointing in different directions, more economic judgment is required.
Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.