I know why they call it the dog days of summerÂ¦news is a bit slow, we have to dig a little harder to find some controversy and metal price forecasts require a bit more brain power than my overheated body and brain can stand this afternoon. So instead, I found myself drifting through the headlines when this snappy little title (and blog post) caught my eye: Double Dip? Seven Reasons Why Not. I forwarded this post to a colleague who works at a steel producer with the tag “What Do You Think About this Post? to which he replied, “In order to double dip, at first you would see evidence of a recovery?? Is that right? What does a recovery look like? What indices should we look at? In my world, we have not come off the bottom yet!!
Well, I wasn’t expecting that reply, but it got me thinking that the WSJ post reminded me more of a class my English schoolteacher father used to teach (Fantasy in Literature) than a rational analysis of why the economy remains healthy. Let’s see what the Seven Dwarfs have to say about those seven reasons we won’t double dip:
- Happy “The Consumer Seems Firm Enough Right. Is this evidence that the consumer seems firm enough (note the blue line)?
2. Grumpy “Housing Data Are Misleading on Two Sides The author suggests we should ignore the tax $8000 first time home credit (agreed) and focus on inventory of unsold homes (it’s only 8 months instead of 13). Doh! (Now there’s an improvement that will keep us healthy)
3. Sneezy “Business Spending and Exports Are Awfully Strong for a Dip If only it weren’t for the fact that our imports exceeded our exports once again, further adding to the overall trade deficit (and we specifically added to our China trade deficit)
4. Sleepy “Overall Production Levels Look Fairly Good Too I can buy that, except this from the latest ISM report doesn’t give me that warm and comfy feeling:
Chart: Courtesy of ISM
5. Dopey “Employment Does Not Look Threatening Either I’m sorry, but this one doesn’t even warrant a comment. If one doesn’t find 9.5% unemployment threatening, well, I’m at a loss for words.
6. Doc “Financial Markets are Healthier Than The Headlines Imply Right. Just check with the folks at Zero Hedge on thatÂ¦.
7. Bashful “China Continues to Grow Hey everybody is this our meal ticket?
As my steel producer colleague said, “there is real GDP like making stuff and selling it and the pretend kind of GDP like derivatives and census workers. We can double dip to hell and back, but untilÃ‚Â we start making more steel, we have not started to recover (in my world). Looking at the US economy my colleague has a point: “The economy is postindustrial, with the service sector contributing 67.8% of GDP, though the United States remains an industrial power. The leading business field by gross business receipts is wholesale and retail trade; by net income it is manufacturing. (I checked the Wikipedia citation to see for myself about that manufacturing contribution, it’s correct).
Hey look – I’m still hopeful Prince Charming will save us from the poison apple!