This week, we’re tackling the nasty rumor that the U.S. economy is headed for (gasp) another recession.
Why? Because earlier in the week, the world’s largest bond fund manager, Bill Gross, said the U.S. economy risks lapsing into a recession.
Oh really? Then how do you explain the fact that railroad shipments are at the highest levels in almost three years? Or that the Federal Reserve’s industrial production index is clearly rebounding?
If the economy were indeed destined for a recession, production materials wouldn’t be moving across America on the rails. And industrial production would be decreasing, not increasing. Just saying, Mr. Gross.
While we’re at it, we might as well prove that the early signs of an economic uptick in the United States aren’t an isolated event, either. Just look at the latest price action in the Baltic Dry Index.
[ad#Google Adsense 336×280-IA]For those that don’t know, the index tracks the cost of shipping major raw materials. Like iron ore, coal, grain, cement, copper, sand and gravel, fertilizer, even plastic granules. Or, more simply, the precursors of economic output. As such, the index provides a measurement of the volume of global trade at the earliest possible stage.
And since August, it’s up about 50%, indicating that the building blocks of global growth are on the move again, too.
Bottom line: Based on the movement of raw materials in the United States and globally, it’s a bit premature to suggest that the United States is destined for another recession.
Ahead of the tape,
— Louis Basenese[ad#jack p.s.]
Source: Wall Street Daily