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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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CNN Moneyline Transcript


LOU DOBBS: Well, my guest says the economy is inching toward recovery. Lakshman Achuthan, MONEYLINE regular, joins us now. Good to have you here.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INST.: Good to be here.

DOBBS: As we've discussed, you believe that we are moving toward recovery. Is there any obstacle to that that you see as being significant?

ACHUTHAN: Between now and an upturn in the economy? I think it's fairly well along. The leading indicators have advanced in a way that shows the economy will turn up in early 2002.

DOBBS: Early 2002. We have, as we've just reported, lower energy prices. We have still low interest rates. Unfortunately, we also have a lower stock market...

ACHUTHAN: Right.

DOBBS: ... as well. What's going to, in your judgment, drive this recovery?

ACHUTHAN: Well, fundamentally, the lower interest rates. Lower prices all around, as you mentioned, make it easier to go out and buy things and for businesses to be profitable. I'm not saying that there's going to be a strong or a robust recovery. I'm simply putting a marker on the calendar as to when we're going to turn and stop contracting and begin advancing. And those items that you mentioned earlier in the report, those are leading indicators.

DOBBS: And that marker is going to fall on the calendar where? In February?

ACHUTHAN: Oh, I take...

DOBBS: In March?

ACHUTHAN: In the first quarter somewhere. Maybe -- you know, because I'm not sure. Between now and then...

DOBBS: Late March?

ACHUTHAN: Late March, February, January, in there.

DOBBS: Right.

ACHUTHAN: And that's about as good you could do because...

DOBBS: Right.

ACHUTHAN: ... try as -- wish as we would like, this is not a precise science.

DOBBS: What's your best judgment as to when we'll see a reduction in the unemployment rate?

ACHUTHAN: A reduction in the unemployment rate could be well out in 2002, well past the middle of the year, because that is a coincident to lagging...

DOBBS: Right.

ACHUTHAN: ... indicator of the economy. So even when the economy begins recovering, like it did in 1991, you could still have unemployment rise into the recovery.

DOBBS: Now, admittedly, these are not complete sales figures that we're looking at for the holiday season, but they look to me, at least, far more robust than I would have expected, given all of the dire alarms that were being set off going into the holiday season. Retail sales -- your reaction to them.

ACHUTHAN: Well, retail sales are a coincident indicator, so they don't tell us where we're headed but where we've been.

DOBBS: Right.

ACHUTHAN: They point to part of the character of this recession. The consumer has kept this from being really bad. The consumer has gone out there and kept this economy afloat. It may be part of the challenge to the recovery, because the consumers already fairly well spent as we begin the recovery. Typically, there is pent up demand for the consumer when you get into the recovery.

DOBBS: We may just have almost exhaustion.

ACHUTHAN: Well, you know, it's like that runner, that marathon runner. You get a runner's high at the end and then second wind.

DOBBS: Go for that second wind. Lakshman, thank you.

ACHUTHAN: Thank you.
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