TEXT OF INTERVIEW
Stacey Vanek-Smith: The markets have had a very good week, both here and overseas. But we’ve gotten some mixed news about retail sales, jobs and other things. Here to help us figure everything out is Chris Low, chief economist with FTN Financial in New York. He joins us live, as he does most Fridays. Good morning, Chris!
Chris Low: Good morning.
Vanek-Smith: Chris, the markets have had a great week. Why are they up so much?
Low: Well that’s right. A 5 percent rally this week, in three days no less. It’s odd. We had almost no data this week and actually that might be part of the thing. We’ve seen weaker than expected numbers in May and June.
Vanek-Smith: Ignorance is bliss.
Low: Yeah, exactly. But I think the other thing is we’ve been obsessed about this thing called a double-dip recession. And now with earnings season coming, people are starting to read what the analysts have to say. And it boils down to this: slowdown, yes; profits, no. So profits are still there, earnings are still there.
Vanek-Smith: Why do we say no recession? I ask because yesterday the International Monetary Fund came out saying growth this year was going to be stronger than expected, growth next year was going to slow down.
Low: Yeah, well one of the things that’s happening right now is we’re transitioning from what economists call the recovery to an expansion. Now what that means is that you’ve got the engine of growth that comes from things like consumer spending and business orders. On top of that, we’ve also had inventory restocking, which gives you… well, it’s like a turbo on top of growth. But it’s temporary. And now that inventories are getting close to where retailers want them to be, that inventory restocking slows. And you always have a slow down about a year into a recovery. We’re getting to that point right now where inventories are contributing less. But you still have the underlying growth in spending and orders.
Vanek-Smith: So Chris, the markets have been up. What about the economy. How is it doing?
Low: Well, it’s slowing down. But it’s not slowing dramatically. I think a good example: We just recently had some ISM manufacturing numbers, went from 65 to 60. To put that into perspective, that’s from a level consistent with 4-4.5 GDP growth. We’ve fallen back to a level consistent with 3.5-4. Again, it’s slower, but it’s not bad.
Vanek-Smith: Our Friday man Chris Low with FTN Financial in New York. Have a great weekend, Chris.
Low: You too, Stacey.
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