Investments
Moody’s Economy.com predicts a 1.1% drop in investment Gross Domestic Product (GDP), over a 2.9% drop in 2007. Given the recent sub-prime mortgage debacle and similar collaterized debt in the corporate market, the 1.1% drop is understated given the tightness in corporate lending and the government's short term stimulus package. The stock market dropped in tandem with recent events over the past few weeks including a one day 309 point drop in the Dow Jones Industrial Average. Non-Residential, Inventory Change, and Residential are the key indicators for the $1.8 Trillion annual business investment (15% of US GDP) and implications upon the economy.
Nonresidential
The Philadelphia Federal Reserve’s Business Outlook Survey for the month of January came in at -20.9, it’s lowest number since October 2001(median of 0 versus 50 for PMI) 1. The index is closely watched in terms of early delivery and blend of manufacturing and business sectors and if a large percentage change occurs investors correlate similar changes to the PMI. The Dow Jones Industrial Average dropped 306 points on January 17, 2008 after the publishing of this report as investors concerns about growth weighed heavily on the market. On the other hand, the PMI for January came in at 50.7%, close to the 6 month average of 50.2%. (The following should be in consumption side?) U.S. service sector contracted in January for the first time since March 2003 coming in at 41.9, from 54.4 for December -- far lower than the forecast 52.5. Any reading below 50 indicates contraction. The ISM d ...