Most people would consider an headline GDP figure of -3.8% right now to be better than what was expected. What was expected was a figure of -5.5%! So why are stocks down, then? Because the better-than-disastrous 3.8% was only better because companies were building up their inventories, and that suggests that an even worse Q1 and Q2 in 2009 are likely. It also suggests that even more job losses are coming. If companies have larger-than-expected inventories, then they need fewer employees to keep their inventories at level to sustain sales. And that means that even more job cuts are coming! That's why the stock market is down on this news, and continuing to move still lower.Friday, January 30, 2009
At -3.8%, GDP is Better Than Expected, But...
Most people would consider an headline GDP figure of -3.8% right now to be better than what was expected. What was expected was a figure of -5.5%! So why are stocks down, then? Because the better-than-disastrous 3.8% was only better because companies were building up their inventories, and that suggests that an even worse Q1 and Q2 in 2009 are likely. It also suggests that even more job losses are coming. If companies have larger-than-expected inventories, then they need fewer employees to keep their inventories at level to sustain sales. And that means that even more job cuts are coming! That's why the stock market is down on this news, and continuing to move still lower.
