Tags: David-Levy | No | Economic | Recovery

David Levy: No Economic Recovery in Sight

Thursday, 28 Oct 2010 09:59 AM

David Levy, chairman of the Jerome Levy Forecasting Center, says there’s no economic recovery in sight.

The problem, says Levy, is that everyone’s saving rather than spending — and the combined deleveraging by consumers, banks, businesses, and state and local governments is hobbling the economy.

Instead of recovery, “domestic profits eroding, corporate earnings becoming increasingly disappointing, and a 60 percent chance of a recession in 2011” are what he sees ahead, Levy tells MarketWatch.

Levy evaluates the economy by looking at profits rather than at gross domestic product, focusing on the money flows that bring positive bottom lines.

“Net fixed investment, normally the most important profit source, remains less than 2 percent of GDP (the postwar range until the last recession was about 4 percent to 10 percent) with limited prospects for improvement in the year ahead,” Levy writes in a note to investors.

“Deep problems mar the outlook for investment in commercial and residential structures, while overcapacity and slow top-line growth expectations limit the potential of the present spurt in capital-equipment outlays.”

Gluskin-Sheff economist David Rosenberg says the only factors supporting the economy are government handouts, which now make up over 20 percent of personal disposable income.

“For all the talk of how a double-dip was averted, we may look back at a 50 reading on consumer confidence — 20 points below recessionary averages in the past — as a sign that the original downturn never really ended,” Rosenberg writes in a note to investors.

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David Levy, chairman of the Jerome Levy Forecasting Center, says there s no economic recovery in sight. The problem, says Levy, is that everyone s saving rather than spending and the combined deleveraging by consumers, banks, businesses, and state and local governments...
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2010-59-28
Thursday, 28 Oct 2010 09:59 AM
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