February 2002
Out of recession by the end of the year
The world is in recession. But it won't be by the end of
the year. It will be the US economy that will show the way out of
the mire. And it will be the US consumer that will hold the centre
in the battle against recession.
The US corporate sector is cutting jobs but not enough to drive
down unit labour costs sufficiently to stem the catastrophic fall
in corporate profits. Write-offs associated with the new wave of
corporate rationalization and with the end of the IT investment
overspend are still huge as most CEOs try to clear their books, in
order to make the next fiscal year (and their stock options) look
better.
Later in the year, though, write-offs will subside sharply and I
expect profits to recover quickly. The leading manufacturing
indicator, the ISM index, has turned up and manufacturing
inventories continue to fall. In the bombed-out technology sector,
there...
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