Erik Larson

Mar 26, 2010

Boring Numbers

The Associated Press is reporting that economists believe the economy will not continue to pick up steam :

“Many economists, however, think the economy has slowed in the current quarter to about half the pace seen at the end of last year.”

Why? Last year’s growth came from manufacturing, not consumer demand (which weakened), restocking dwindling inventories from businesses who had let them lapse in the face of weakened demand for goods.

Like this:

Consumers stop spending —> businesses stop buying goods —> inventories go down —> factories occasionally get orders to restock the shelves —> small blips in production show up, but don’t last (because consumers haven’t started spending yet)

So? Sooo? So the unemployment is at 9.7%, not likely to change much, because the economy is forecasted to grow at only 2.5 - 3% next year, which isn’t enough to pull us out of the bad effects of the recession. (I suppose the bad news will breathe new life into Super-Keynesian Paul “Spend, Baby, Spend” Krugman, who will argue afresh that this proves that the first stimulus wasn’t enough.)

Oh well, on the economic debate goes. As actress Kate Beckinsale once quipped, “numbers are boring”. Well, they are. And scary sometimes, too.