Friday, January 27, 2006

The Good, The Bad, and the Ugly

U.S. Economy Grows at Slowest Pace in Three Years
Published: January 27, 2006

The lead Business article at the NYTimes. The GDP was down in the Fourth Quarter to 1.1% according to released Government reports. Consumer and Government military spending were down, the later by 13.1%. Consumer spending was down because of the decrease in Sports Utility vehicle Sales, a huge drop indicating Consumers are good Economists; purchases dropped with the end of huge discounts by Automakers--said discounts providing a removal of added Gas pricing. A classic Consumer awareness that Operational Costs lower the value of Product. This is the Good, as Business and Industry are forced to alter their Product provision to better, more economical Products.

A major trouble spot lay in the fact that median Home Sales dropped by 3.4% while Inventories rose. The Housing Market is not clearing, indicating that either overConstruction has occurred, or Consumers are confronting a Financing block because of higher Interest rates and other higher Maintenance Costs--especially Energy. Expect Inventories to accumulate as overburdened Consumers realize they have overCapitalized. This Author perdicts that median Home Sales will fall another 12% over the Year. The Fed benchmark rate is already too high at 4.25%, canceling Business expansion in marginal sectors because of the increased Cost of Running Capital. This is the Bad.

Disposable Income remains less than the Inflation rate of 3.1% for the Fourth Quarter on an annual basis. The poor showing of Business in capital equipment and Software purchases foretell curtailment of the 7% increase in Disposable Income as fewer Workers are added to the Employment Rolls. This is heavily enforced by the 9.1% increase in Imports. The Later happens to be the Ugly. lgl

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