The Carroll Standard

Another economic chart you won't see in vintage media: When it comes to the U.S. economy, 'Something is wrong'

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Doug Ross:

And that something is you-know-who. James Pethokoukis points us to a Strategas Research report that delivers the not-so-shocking news.

The significant risk of an economic slowdown in the U.S. economy, which is still 71% consumer spending, tends to come when you have the saving rate rising at the same time you have a shock, such as an energy & inflation spike. Looking at 2012, the personal saving rate has declined to 3.4%, and with inflation now trending lower (following the drop in energy prices), it does not appear that we have the typical pre-conditions for a domestic recession this year, despite the uncertainty in Europe. WTI oil at $82 is significant.

However, we must stop short of saying that these 2012 developments make the U.S. economy robust to shocks, including the 2013 “fiscal cliff.” The main reason is that nominal GDP still looks vulnerable, running at just below a 4% pace. A more robust expansion would typically be characterized by nominal growth of at least 6%, ie, something is wrong.


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