Tags: Yardeni | economy | Fed | recovery

Economist Yardeni: Why Winter's 'Ice Patch' Is Turning Into Spring's 'Soft Patch'

By    |   Tuesday, 28 April 2015 07:00 AM

Economic growth slowed during the winter, and it's not looking so hot for the spring either, according to star economist Edward Yardeni, president of Yardeni Research.

"The winter's ice patch is looking more and more like the spring's soft patch — all the more reason to expect either one-and-done or none-and-done from the Fed," he writes in a commentary provided to Newsmax Finance.

He was referring to the possibility of an interest-rate increase from the Federal Reserve this year. Many economists expect one in September at the earliest.

Yardeni notes the signs of weakness include:
  • The average of the business surveys for the Fed districts of Kansas City, New York and Philadelphia fell to negative 0.2 this month, the lowest since May 2013 and down from positive 2.6 last month, Yardeni points out.
  • The national flash Purchasing Managers Index compiled by Markit fell to 54.2 this month from 55.7 in March.
  • Durable goods orders rose 4 percent last month overall; however, non-defense capital goods orders excluding aircraft fell for the seventh straight month — by 6.7 percent.
  • Lumber prices have plunged since the beginning of the year. "That's not a good omen for housing starts," Yardeni explains.
The economy has experienced a subpar recovery from the 2007-09 recession, growing only 2.2 percent annualized since then, despite massive monetary and fiscal policy stimulus.

"Most believe the central problem is chronic demand weakness," James Paulsen, chief investment strategist at Wells Capital Management, writes in a commentary provided to Newsmax Finance.

So, "U.S. economic policy officials have persistently employed massive and unconventional economic policies aimed at reviving perceived troublesomely weak aggregate demand."

But obviously that hasn't done the trick.

"Rather than facing an unresponsive aggregate demand, we believe the primary problem is U.S. policy officials continue to employ demand-side policies to address an economy suffering primarily from supply-side problems," Paulsen writes.

So what should we do to increase supply?

"Certainly reopening Ellis Island [to immigration] would help boost labor supply growth and raise the speed of future recoveries," he says. But given political constraints, this will take a while.

"More immediately, we are hopeful the second half of this recovery will see improved productivity performance," Paulsen maintains. "This will require faster investment spending from both the private and public sectors, adding technologies and infrastructure."

Productivity slumped an annualized 1.8 percent in the fourth quarter.

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Economic growth slowed during the winter, and it's not looking so hot for the spring either, according to star economist Edward Yardeni, president of Yardeni Research.
Yardeni, economy, Fed, recovery
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2015-00-28
Tuesday, 28 April 2015 07:00 AM
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