December 3, 2009
World leaders, politicians, investors, workers, and even economists have all made their list, and checked it twice. We all want the same thing! We want an economic recovery that allows job growth and sustained economic growth worldwide. Now it’s Santa’s job to figure out who has been naughty and nice and to decide who will get what they want and who will get coal in their stocking.
Experts are constantly opining as to whether the recovery will continue and if it does what shape it will take. These calls usually are focused on the U.S. GDP as a proxy for “the recovery”. Many experts also believe that the “fast world” can’t continue growing if the “slow world” goes back down the chute. The frame of reference continues to be U.S. centric and out toward the rest of the world. Luckily, Santa flies above all of this in his sled; he has a truly global view.
Everyone knows that China and India’s governments have been more successful at spending their way back into growth than the U.S. has been. Chinese government sponsored think tanks expect more than 10% GDP growth during the fourth quarter. Indian GDP grew 7.9% during the third quarter and is expected to expand faster in the fourth quarter excluding the impact of any agricultural weather related shortfalls.
About a year ago, I heard one of the most expert and long standing Chinese economy experts domiciled in the U.S. discuss the worldwide recession. He made the statement that, “the emerging world is growing very quickly, and has considerably stronger fundamentals than the U.S. and Europe, but the numbers are such that they can’t possibly pull us out of a recession.”
I agree with this assessment, but luckily Santa isn’t confronted with using only emerging market largesse, and the power of his reindeer, to pull the U.S. and Europe out of recession. His elves have conjured up a powerful inventory cycle back at the North Pole and they have created a self-sustaining momentum by feeding their inventory cycle machine with better than expected profits. Germany and France came out of recession a quarter earlier than the U.S. Japan also emerged from recession in the second quarter at a 2.7% GDP growth rate and expanded to a totally unexpected level of growth of 4.8% in the third quarter.
Corporate business spending is bringing the U.S. out of recession to join the “fast world” in a recovery for 2010. Santa may think we’ve been naughty, but enough of us must be nice to warrant the gift of a continued business cycle recovery.
- We are at inventories levels that need to be rebuilt.
- We are seeing demand for housing at bargain prices.
- We are seeing substantial world demand strength for semiconductors.
In fact we have a significant manufacturing recovery underway worldwide and this will undoubtedly lead to growth in employment next year. Everyone worries about final demand without acknowledging that employing people strengthens demand.
Santa knows that people will be buying presents and putting them under their trees this Christmas season. It doesn’t matter whether they spend a little less this year than last year in the United States. The really big present isn’t under the tree. The self-sustaining recovery that’s occurring worldwide being brought to us by Santa will make Christmas 2010 better than the one we have this year.
Vice Chairman and
Chairman of Investment Policy
Beacon Trust Company
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