What goes up, will come down
tRaDe OfF
Courtesy of The Pragmatic Capitalist
Two of the primary drivers of the economic recovery are now becoming
headwinds. In an interview on CNBC yesterday Jan Hatzius of Goldman
Sachs described why he is more bearish than the consensus. His
primary concerns are the inventory and stimulus headwinds. In a
similar strategy note UniCredit expressed the same concerns and
provided some more detail. They believe these two trends alone could
shave 6 to 7 points from GDP:
�Our expectation of a significant growth slowdown is largely based
on the assumption that the growth at the end of 2009/ beginning of
2010 was supported primarily by temporary factors, whose contribution
will not only decline in the course of this year but is even likely to
become negative. The fiscal program (American Recovery and
Reinvestment Act) and private inventories added roughly 5 percentage
points to growth in both the fourth quarter of 2009 and the first
quarter of 2010. In the spring, this contribution already dwindled to
half a percentage point, and in the second half of 2010 as well as
2011 both components are likely to shave roughly 1�pp off growth. The
swing is, therefore, a considerable six to seven percentage points.�