Thursday, June 29th, 2006
Growth manager: economy slowing
US data showed the economy grew at a solid clip in the first quarter, driven by consumer spending. But Joseph Carson, an economist at growth fund manager AllianceBernstein, says there are signs of a slowing economy. The fund manager focusses on leading indicators rather than reports covering current economic conditions “which provide little insight as to where the economy is headed.” Carson says the message from leading indicators is as clear as day: “A slower pace of growth is underway.”
“Our liquidity index suggests to us that real GDP growth will begin to slow in the current period and that the slowing will extend through the second half of 2006. We can glean additional insight into the depth and duration of the economic slowdown from the economic leading indicators. Each has successfully forecast changes in each business cycle, with the most consistent and timely signals coming from building permits and new orders. At the moment, their signal is consistent with that of our liquidity index, i.e., a slowdown in growth to about 2%.”
With growth companies’ earnings tied closely to the rate of expansion of the economy, that’s likely to be bad news.
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