While there is still talk about green shoots, the data suggests something else. The US economy is still in serious decline and things are not really looking better.
First, there are the reports of US companies winding back their inventories to cope with demand that's just vanished. While people have been talking about a recovery of sorts, companies have been cutting their inventories now for the last seven months. That hardly suggests a rebound.
Then there is the unexpectedly poor 0.4% drop in retail sales, as reported here, on the back of rising unemployment touching nearly 9% and tighter credit. Macy's has reported an $88 million loss for the quarter with sales falling 9.5% and margins contracting as the retailer tries to lure back customers.
Not surprisingly, Nobel Laureate Paul Krugman warns that the US faces a decade of stagnation because of the US Government's wimpish "half-measures".
Writing in Forbes, economist Nouriel Roubini suggests the so-called green shoots might actually be yellow weeds. "While there do seem to be some signs of improvement, in that the pace of contraction has slowed, the most recent data may still suggest that the global economic contraction is still in full swing with a very severe, deep and protracted U-shaped recession,'' Roubini writes. "Another necessary condition for a global recovery is a bottoming in not only the U.S. but also global housing markets. So far, in most markets, housing prices seem far from their bottom and the outstanding inventory continues to be very high. Moreover, there is a risk that the increase in commodity prices might choke off a sustainable recovery if it weighs on industrial production and consumption."
In other words, there is still a long way to go and there's no light yet at the tunnel.
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