Friday, June 27, 2008

ECONOMY 2008: THE SECOND HALF

This is a rather gloomy assessment. Hopefully there is some good news that is just over the horizon and not yet on radar.

The stock market expects the future to be less profitable. Market is down big time this week.

Oil closed above $140. High oil & gasoline prices will probably be a strain for some time [3-6 months +]. Not seeing $1.999 gas any time soon. The station here in town has regular 87 up to $4.199 [6/27/08]. This was a jump of 20 cents from yesterday [the price had fallen 6 cents in the previous 24 hours].

Taxes look to be going higher not lower.

Unemployment is 5.5%. It jumped .5% as the most recent move. Will probably increase for the rest of the year. It may hold steady for a month or two but the trend is for higher unemployment to close out the year. Prediction is 5.9% - 6.1% unemployment to close out the year.

What else may happen...
  • Firms will have lower profits in the second half.
  • Shareholders will demand that management fix it.
  • Management will cut costs [add more technology and reduce payroll].
  • This will increase productivity and should help margins a bit.
  • The folks who are unhired will have trouble finding replacement income.
  • Consumer spending will drop.
  • Sales and profits will fall.
What are your thoughts?

2 comments:

Sara said...

My thought is that it's just plain scary. I feel like our economy is a house of cards.

Ankit said...

I agree with the impact i.e. consumer spending will drop, Profits will be lesser - what needs to be seen is, will this impact be spread over time or would it be snap !!