Look For A V-shaped Recovery, Steinberg Says

Jan. 13, 2005
By John S. McClenahen While other economists are still arguing over whether the U.S. economy is in recession, Bruce Steinberg, chief economist at Merrill Lynch & Co., is describing the shape of economic recovery. The economy will "snap back," its ...
ByJohn S. McClenahen While other economists are still arguing over whether the U.S. economy is in recession, Bruce Steinberg, chief economist at Merrill Lynch & Co., is describing the shape of economic recovery. The economy will "snap back," its recovery looking like a "V" when plotted a graph, says Steinberg, who stubbornly continues to insist the American economy is not slipping into recession. "True, in January, the Purchasing Managers' [Manufacturing] Index fell to 41.2, its worst showing since 1991," he acknowledges. "But the rapid decline of the industrial sector is actually a testimony to hugely improved supply-chain management. We believe that inventory excess will be largely worked off by mid-year, leading to a much better second half." How much better? Merrill Lynch foresees GDP increasing at an inflation-adjusted 3.2% annual rate in this year's third calendar quarter and at a 3.8% annual rate in the fourth quarter. Coupled with a projected 1.5% annual rate in the current quarter and a 2.2% annual rate in the second quarter, 2001 would post a 2.3% GDP gain. Steinberg also is predicting that the influential federal funds rate, now at 5.5%, will be down to 4.75% by May.

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