USA: Economic Growth Slows to Its Weakest Pace in 4 Years

[Guest guest]

Dear friends,

 

The growth of the US economy in the first three months of 2007 slowed

down to a crawl due to weakness in the housing sector. This

development is in line with the SAMVA USA chart. It signals that the

difficult transits have already begun to take their toll in the three

months from January through March of this year. I wouldn´t be

surprised if the second quarter (April to June) would also be weak.

 

Futures share prices are down prior to the open. We will see later

today what the financial markets make of this new information. What

seems to be clear is that this information is being received by the

market as a negative. This is because weaker growth punctures

profits. Lower interest rates would off-set that, but the initial

impact would be to reduce earnings. This the markets have to price in

today. The question is by how much.

 

Best wishes,

 

Thor

 

Growth Rate Down in First Quarter

Friday April 27, 8:37 am ET

By Jeannine Aversa, AP Economics Writer

Economic Growth in First Quarter Slows to Its Weakest Pace in 4 Years

 

WASHINGTON (AP) -- Economic growth slowed to a near crawl of 1.3

percent in the first three months of 2007, the worst performance in

four years. The main culprit: the housing slump.

The fresh reading on gross domestic product, released by the Commerce

Department on Friday, was even weaker than the 2.5 percent growth

rate logged in the final three months of last year. The new figures

underscored just how much momentum the economy has been losing as it

copes with the strain of the troubled housing market, which has made

some businesses more cautious in their spending.

 

The first-quarter GDP figure was the weakest since a 1.2 percent pace

registered in the opening quarter of 2003. GDP measures the value of

all goods and services produced within the United States and is

considered the best barometer of the country's economic fitness.

[Guest guest]

Dear list members,The news continues bad for the USA:Euro Hits All-Time High Against Dollar... FORD says April auto industry sales 'terrible'... Legendary investor: We are living in the first worldwide bubble...But the stock market just seems to shrug it off and advance higher into record territory. Go figure!!Best wishes,Thor cosmologer <cosmologer wrote: Dear friends,The growth of the US economy in the first three months of 2007 slowed down to a crawl due to weakness in the housing sector. This development is in line with the SAMVA USA chart. It signals that the difficult transits have already begun to take their toll in the three months from January through March of this year. I wouldn´t be surprised if the second quarter (April to June) would also be weak.Futures share prices are down prior to the open. We will see later today what the financial markets make of this new information. What seems to be clear is that this information is being received by the market as a negative. This is because weaker growth punctures profits. Lower interest rates would off-set that, but the initial impact would be to reduce earnings. This the markets have to price in today. The question is by how much.Best

wishes,ThorGrowth Rate Down in First QuarterFriday April 27, 8:37 am ET By Jeannine Aversa, AP Economics Writer Economic Growth in First Quarter Slows to Its Weakest Pace in 4 Years WASHINGTON (AP) -- Economic growth slowed to a near crawl of 1.3 percent in the first three months of 2007, the worst performance in four years. The main culprit: the housing slump.The fresh reading on gross domestic product, released by the Commerce Department on Friday, was even weaker than the 2.5 percent growth rate logged in the final three months of last year. The new figures underscored just how much momentum the economy has been losing as it copes with the strain of the troubled housing market, which has made some businesses more cautious in their spending. The first-quarter GDP figure was the weakest since a 1.2 percent pace registered in the opening quarter of 2003. GDP measures the value of all goods

and services produced within the United States and is considered the best barometer of the country's economic fitness.

[Guest guest]

the reason the stock market is holding up so well is because some economists do not think that slow growth is a bad thing. nor do they think that the dollar doing so badly against the euro is a bad thing, either. their reasoning is that because the growth is slow and the dollar lagging, we will not slide into a real recession. and that, as we all know, is a very bad thing..... kimmer

[Guest guest]

Hello kimmer,

 

Touche. You raise a valid point that slow growth is not necessarily a

bad thing. My comments were simply an expression of a sense of

conundrum over the developments. I was focused on the link between

share prices and earnings growth - also known as the Price/Earnings

ratio. If Earnings expectations take a hit, because e.g. a slow down

in growth, the P/E ratio would rise. In other words, investors then

need to wait for a longer time to get their money back. When the P/E

ratio rises significantly it is usually taken as a sign of a bubble,

which can (and most often does) burst. In a market characterised by

equilibrium, when earnings expecations drop, the share prices would

tend to fall and the P/E to remain at the prior level. In the long

term, the P/E of firms traded on the US stock exchanges has tended

towards some historical average, around 13. However, in the

short term, the P/E can gravitate way above that, and in the Japanes

bubble the P/E was seen close to 60 or 70. In the US the ratio has

moved to the 30-40 range. I believe the P/E is higher than the

historical average at this time, although I haven´t seen any

statistics on it of late. In sum, I was simply commenting on a

conundrum to me that the market remained so positive that bad news

did not seem to dent it. Now that you have made me think more about

it, I think it is a classic sign of a bubble. We'll see how the stock

market develops in coming weeks.

 

Best wishes,

 

Thor

 

 

SAMVA , " kimmer tom " <kimmertom wrote:

>

> the reason the stock market is holding up

> so well is because some economists do not

> think that slow growth is a bad thing. nor

> do they think that the dollar doing so badly

> against the euro is a bad thing, either.

>

> their reasoning is that because the growth is

> slow and the dollar lagging, we will not slide

> into a real recession.

>

> and that, as we all know, is a very bad thing.....

>

> kimmer

>

[Guest guest]

U.S. Stocks Fall on Economy Concern; Target, Retailers Decline

By Eric Martin

 

April 30 (Bloomberg) -- The U.S. stock market ended the best month

since 2003 by declining for a third straight day after slower growth

in personal spending added to concern the economic expansion may falter.

 

Target Corp. and Home Depot Inc. led retailers to their steepest drop

in six weeks after the Commerce Department's March report cast doubt

on the consumer's ability to keep driving the economy. Twenty-nine of

the 30 retailers in the Standard & Poor's 500 Index fell. Hilton

Hotels Corp. slumped the most in almost two months after predicting

full-year profit will trail analysts' estimates.

 

Weaker construction spending and business output also dented an April

rally that sent the Dow Jones Industrial Average to three records last

week and the S & P 500 to a six-year high, bolstered by

better-than-expected earnings. Signs the weakening economy is reducing

inflation helped lift Treasury bonds to their biggest gain in seven weeks.

 

``The consumer can't borrow and will be spending less, which will slow

economic growth,'' said David Pearl, who helps manage $5.4 billion at

Epoch Investment Partners in New York. ``The market has tapped itself

out and it's either sideways or down for the next few months.''

 

The S & P 500 lost 11.70, or 0.8 percent, to 1482.37. The Dow

industrials declined 58.03, or 0.4 percent, to 13,062.91. The Nasdaq

Composite Index sank 32.12, or 1.3 percent, to 2525.09.

SAMVA , " cosmologer " <cosmologer wrote:

>

> Hello kimmer,

>

> Touche. You raise a valid point that slow growth is not necessarily a

> bad thing. My comments were simply an expression of a sense of

> conundrum over the developments. I was focused on the link between

> share prices and earnings growth - also known as the Price/Earnings

> ratio. If Earnings expectations take a hit, because e.g. a slow down

> in growth, the P/E ratio would rise. In other words, investors then

> need to wait for a longer time to get their money back. When the P/E

> ratio rises significantly it is usually taken as a sign of a bubble,

> which can (and most often does) burst. In a market characterised by

> equilibrium, when earnings expecations drop, the share prices would

> tend to fall and the P/E to remain at the prior level. In the long

> term, the P/E of firms traded on the US stock exchanges has tended

> towards some historical average, around 13. However, in the

> short term, the P/E can gravitate way above that, and in the Japanes

> bubble the P/E was seen close to 60 or 70. In the US the ratio has

> moved to the 30-40 range. I believe the P/E is higher than the

> historical average at this time, although I haven´t seen any

> statistics on it of late. In sum, I was simply commenting on a

> conundrum to me that the market remained so positive that bad news

> did not seem to dent it. Now that you have made me think more about

> it, I think it is a classic sign of a bubble. We'll see how the stock

> market develops in coming weeks.

>

> Best wishes,

>

> Thor

>

>

> SAMVA , " kimmer tom " <kimmertom@> wrote:

> >

> > the reason the stock market is holding up

> > so well is because some economists do not

> > think that slow growth is a bad thing. nor

> > do they think that the dollar doing so badly

> > against the euro is a bad thing, either.

> >

> > their reasoning is that because the growth is

> > slow and the dollar lagging, we will not slide

> > into a real recession.

> >

> > and that, as we all know, is a very bad thing.....

> >

> > kimmer

> >

>