>What is understood to be the foundation of this
>nascent recovery? Focusing on manufacturing for a
>moment, what sorts of goods are being ordered and by
>what sorts of businesses?
Hard to say exactly, from the data we have, but investment in equipment and software was fairly strong in this morning's U.S. GDP report, after several years of contraction.
Other strong elements: "defense" (up 44% in real annualized terms!) and consumer durables (mostly motor vehicles).
Still, it's not a boom - 2.4% top-line growth isn't great. It's below-trend, meaning that the "output gap" - the difference between actual and potential GDP - is still widening. But it's better than expected, and comes along with other signs of stabilization/recovery. Tomorrow's employment report is likely to be flattish, which is decent coming after five months of shrinkage.
>I ask this because I find discussions of revovery to
>be confusing. On the one hand, we are told, for
>example, that there is some sort of over-capacity
>issue (some even say crisis) that cannot be easily
>resolved until demand is expanded beyond the over-used
>American market, the EU and Asia.
>
>On the other hand, we're told that no such problem
>exists and the present slump is not an indication of a
>global malaise but a normal, statistically predictable
>dip that will right itself.
>
>Considering that a good amount of the highly praised
>profitability and productivity gains of the 1990's
>were, seen in retrospect, less substantial than
>unicorns and an immense house of mirrors was built to
>keep the market super-heated what solid factors are in
>play (besides a one time hit of extra spending cash
>via the tax rebate)?
>
>Surely the bust was caused by systemic problems and
>uncontrolled (or uncontrollable) trends. What's
>changed?
Time has passed for one. A lot of capacity becomes worthless, or loses value, with time.
I think this is a cyclical recovery within a longer-term troubled trend. It's not a boom, but the U.S. economy looks to be keeping its nostrils above the water line.
Doug