Don’t Bet on a Recession

Trade and strong business balance sheets bode well for the economy.

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"No recession," says the sliding bond market. "No recession," say surging oil prices. "No recession," say rising commodity prices. "No recession," says Gail Fosler, the highly respected chief economist at the Conference Board. Well, that may be overstating things a touch. At least a downturn is not imminent, she says. Here are her fairly bullish bullet points from a new report:

1) Balance sheets in the nonfinancial business sector are as strong as they have been since the 1960s.

2) The housing market correction is about over, probably subtracting about 0.4 percentage points from 2008 growth. Cheaper homes and lower rates are helping housing affordability, and that bodes well for the spring selling season.

3) Exports are rising at a 13 percent annual rate, and that is likely to add about a half percentage point to growth in gross domestic product this year—more than offsetting the decline in housing.

4) Although the rate of consumer spending growth has fallen—from 4 percent in 2005 to 2-2.5 percent now—shoppers still have plenty of ammo, thanks to wage and salary growth running at a 5 percent annual clip.

5) There's a credit crunch, not a credit collapse:

Top global financial institutions have disclosed roughly $125 to $150 billion in asset writedowns associated with the recent financial turmoil. But when all the dust settles, even if their profitability is damaged, their balance sheets are likely to be little affected. Because of the mark-to-market rules, the write-offs associated with structured products, including subprime mortgages, are likely to be revalued over the course of the year as the markets begin to trade those securities.