Investors who don’t trade on the short term generally look at what normally is expected to happen at various time lines in the future that lie beyond the next six months.
In this context, former Federal Reserve Chairman Alan Greenspan just made some interesting comments: “I think we're OK for the next six months. … We are getting a recovery in (housing) starts and motor vehicles, but the process doesn't have legs to it.”
U.S. consumers' finances will remain shaky, even after three years of housing market declines. New vehicle sales probably will fade once the Cash for Clunkers program's cash is exhausted.
That said, while Greenspan expects consumption to remain weak, he also states that consumption has been running at about one-and-a-quarter percentage points above the level of economic output, which erodes the inventories of goods and will have to be restocked sooner rather than later.
Greenspan estimates this will generate a growth factor of 4 percent to 5 percent to GDP over the coming six months. So, we’ll have to wait until November to see how that plays out in the first estimate of the third quarter GDP that should be up nicely.
In the mean time we’ll see what the second quarter GDP first revision tells us on August 27 when it will be released.
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