According to Martin Feldstein, an economics professor at Harvard, “The recent government report that US gross domestic product increased 0.5 percent in the first quarter was very misleading,” which he shared in this Financial Times article. The writer continues to say that the increase is not due to actual economic activity in the months of January through March, but rather to the rise from the average level in the fourth quarter of 2007 to the average level in the first quarter of 2008. But the doom doesn’t stop there. Feldstein points to falling real incomes, plummeting consumer confidence, and declining household wealth that will only continue to fuel reduced consumer spending and a falling GDP. He continues by pointing to the number of individuals with negative equity mortgages which will create a downward spiral in house prices and wealth. The result will be, according to Feldstein, “a deeper and longer recession than any seen in the past several decades”.
Yikes. He’s a doom and gloom guy. But who am I to argue with these predictions? I’ll tell you one thing, though; some industries are booming (and I mean really booming). Let’s hope that the oil and gas, metals and mining, machinery, conglomerates and our old friends tobacco can keep this economy afloat. Not sure about you, but I don’t like ugly.