Saturday, May 12, 2007

The Economic Disconnect

My take away from the economic data last week is that there will be a downward revision in 1st quarter GDP, presently pegged at 1.3%. The shabby inventory data and the bloated trade deficit figures are weak additional pieces of the puzzle that weren't available in the first guess that led to the 1.3% annualized GDP figure for the first three months of the year. A variety of economic pundits are now coming out of the wood work to suggest that Q1 growth will come in below the 1% mark. Is it too early to ring the bell and prognosticate a 0% growth pace for this quarter (Q2)? Perhaps, so every piece of data that comes our way will need to looked at very closely. The week ahead features CPI on Tuesday, housing starts and industrial output on Wednesday and the Philly Fed survey on Thursday. A growth recession already? Golly, that could be the best news yet for those Wall Street bulls who are wishing, hoping and dreaming of a Fed rate cut. This is why I still think S&P 1550 is possible, but be careful what you wish for.

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