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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.

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