Economy Watch: U.S. Growth to Slow but No Double Dip
- May 24, 2010
May 24, 2010
By Dees Stribling, Contributing Editor
“Exactly a year ago, economists were blindsided by first quarter GDP growth data staying near half-century lows, following a London G20 conference where the D-word — depression — dominated discussions,” noted a report by the Economic Cycle Research Institute (ECRI) over the weekend. “That’s when ECRI warned publicly that the recession would end by summer.”
The ECRI, in case anyone has forgotten, is the private organization that economists look to for pinpointing the timing of economic cycles (and which said the Great Recession actually began in December 2007). The ECRI report went on to say and we were right. “In hindsight, that forecast was spot on,” the report asserted. “But it was a very lonely position to take at the time–in part because well-known indexes of leading economic indicators were still falling.”
But enough of the organization tooting its own horn. What now? A bump in the road. “Following the initial post-recession spurt, economic growth always throttles back at some point, since it can’t keep accelerating forever,” the ECRI said. “Quite simply, that in line with the first quarter’s downshift in GDP growth from a six-year high, income and sales growth will also start easing in the next few months. The good news is that there’s still no ‘double dip’ in sight.”
Wal-Mart Looks to Take Over Deliveries
Wal-Mart Stores Inc., famous (or infamous) for squeezing its suppliers as much as possible to get the lowest possible price, has unveiled another major cost-cutting strategy, one with possible ramifications for industrial real estate, considering the sheer volume of goods moved on behalf of the retail giant.
The company wants to take over the delivery of goods directly from manufacturers (or ports, in many cases) to Wal-Mart distribution centers, from where the goods go to stores and Sam’s Club locations. It wants to take over the distribution, provided it can do so more cheaply than the manufacturer. Wal-Mart has a fleet of roughly 6,500 trucks, 55,000 trailers, and an iron will to make this happen.
One possible impact on other retailers is that the price of deliveries will go up for them as manufactures’ volume of deliveries goes down. Fewer deliveries will mean more expensive ones for everyone by Wal-Mart, because of the loss of scale.
Ailing Spanish Savings Bank Seized
The Bank of Spain seized CajaSur, a savings bank with about $16.36 billion in outstanding loans, over the weekend. The ailing institution needs a big euro bailout. The problem with CajaSur? Mostly bum real estate loans.
Last year, Córdoba-based CajaSur lost about 596 million euros ($750 million). Bank of Spain officials say that putting the troubled institution will take an infusion of roughly 550 million euros of capital, which is about $691 billion these days. The question now is whether the bank bailout is a mere tremor or the first rumblings of a mighty earthquake under the Spanish economy.
Wall Street yo-yoed upward again on Friday, with the Dow Jones Industrial Average ended up 125.38 points, or 1.25 percent. The S&P 500 gained 1.5 percent and the Nasdaq advanced 1.14 percent.