Economist John Hussman says that rising GDP numbers don't mean much.
"(Consumer) consumption represents roughly 70 percent of economic activity, it is by far the least volatile component of GDP, particularly when durable goods are excluded," Hussman writes in a note to investors.
"The main sources of fluctuation in GDP growth are credit-sensitive expenditures and inventories."
Moreover, the recent buildup of inventories and the expiration of stimuli such as cash-for-clunkers and first time homebuyers' credit don't point to increased consumption.
"For that reason, it appears likely that the positive growth of GDP in recent quarters will have relatively poor follow-through ... (there is) little reason to expect actual economic activity to deviate from what is already suggested by weak leading indicators."
Hussman says he’ll need to see “both an improvement in those leading indicators and an improvement in market internals” before his evaluation of investment conditions becomes more positive.
“For now, however, we remain defensive about risks that still appear significant,” he says. “If the U.S. economy averts a period of fresh economic weakness, we could instead observe a more drawn out period of stagnation and price pressure.”
The likelihood of a renewed economic contraction remained elevated amid consumers' weakening outlook and an anemic housing market, according to University of Michigan's director of surveys Richard Curtin.
A weak consumer sector would lead to a "stretched-out "U-shaped recovery in the United States,” Curtin, who forecast a 2 percent growth in consumer spending, told Reuters Insider.
Still, "a double-dip recession is unlikely," Curtin said.
© 2017 Newsmax Finance. All rights reserved.