Where is the U.S. Economy Heading?
The huge inventory sell-off last year has raise hopes for a decent pickup in U.S. economic activity in the first half of this year. There is a lot of sense in this viewpoint because the scale of the destocking means that even if consumers are not ready to splash out, there has to be some ramping up of production to meet continuing demand. Indeed there are indications of firming in order books. Also, without getting too excited, we should note a few signs of life in capital spending, on the technology side. At the same time, it is unlikely that inventory accumulation will reach previous levels because firms are still cautious about the vigour of sales growth. Indeed, currently, CEO’s are less ebullient than economists are, about the prospects for the economy. However, given tight cost controls, an increase in productivity should show up in greater operating leverage and higher profit margins -- though, bottom-up analyst expectations are still a
