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Double-Dip Recession? Seven Reasons Why Not, Says Lord Abbett's Ezrati

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Here are Milton Ezrati’s seven reasons to doubt the double-dip outlook.

1. The Consumer Seems Firm Enough

Though retail sales in May dipped by 1.4%, it followed a powerful 10% advance in retail sales during the prior 12 months.

Also, household income has risen sufficiently enough to support future spending, he says. And the personal savings rate, at 4.0% of after-tax income, generates a $454 billion annual flow of new money from which households can pay down debt even as they maintain existing levels of spending.

2. Housing Data Are Misleading

The most significant consideration is the drop in the inventory of unsold homes, 27% during the last 12 months, according to Ezrati.

Plus, realtors say the median sales price of homes sold in the United States has risen 5.3% so far this year.

3. Business Spending and Exports Are Strong

Shipments of capital goods (excluding defense materials) rose at a 3.0% annual rate during April and May — the same pace they have maintained during the past 12 months. More telling of expectations than actual shipments,

“New orders for capital goods exploded at a remarkable 48.3% annual rate during this supposedly weak April-May period — a tremendous acceleration from the already rapid 25% rate of expansion during the prior 12 months,” Ezrati writes.

Total U.S. exports have expanded at an impressive annual rate of almost 17%, he points out, jumping at a 12.7% annual rate in April.

4. Overall Production Looks Good

Industrial production continues to rise at impressive rates, the economist says.

Similarly, the Purchasing Managers Index (PMI) of the Institute of Supply Management shows continued growth.

5. Employment Isn’t Threatening

“Indicators on hours, temporary employment, and even full-time employment have begun to edge up,” wrote Ezrati.

And the jobs market is slightly ahead of schedule, according to these historical benchmarks, he says.

6. Financial Markets Are Healthier Than Headlines

Markets have avoided the much-looked for relapse into the mess of 2008-2009, according to Ezrati, and issues continue to get sold on bond and money markets – with bank lending has shown some tentative signs of flowing again.

7. China Keeps Growing

“If, as expected, China’s overall growth slows for an 11.9% annual rate in the first quarter, to 9.5%, it will still remain faster than the rest of the world–and hardly the stuff of which double dips are made,” he concluded.


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