MONDAY AUGUST 17, 2009

Recovery Catalyst?

The most common way economies work out of a recession is through consumer spending. In the U.S., the consumer comprises roughly 70% of our economy. Today’s market weakness is based on concerns that the consumer is not going to participate in the recovery. It is clear that savings rates are up. However, the “Cash for Clunkers” car program demonstrates that the consumer will buy if the deal is right.


 

On the other hand, most corporations are in good financial shape, with large cash positions on their balance sheets. Inventory levels have been purge to low levels that practically force an increase in production schedules just to keep pace with today's weak sales levels.   Manufacturing in the New York showed growth in the month of August for the first time more that a year. Ford Motor announced that it would be increasing production to replenish inventories. This manufacturing news indicates that the economy will return to positive economic growth in the next quarter.

 

So, this economy is likely to be led by corporate America. The question today is what kind of growth will the economy muster? If the consumer remains on the sideline, any economic recovery is likely to be tepid.

POSTED AT 1899-12-30 15:43:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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The opinions expressed here do not represent the views of Alliance Financial Corporation and Alliance Bank, N.A. This communication is not an offer or solicitation for the purchase or sale of any security, is for general informational purposes only and does not provide personalized investment advice. When making personal investment decisions you should consult your investment adviser or rely on your own research. Copyright 2008.