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

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.