The Known Unknown
When analyzing the U.S. economy's recovery prospects, one key factor that often comes into play is perhaps the most difficult to nail down: pent-up demand. At the moment, households are cutting back on discretionary spending and rebuilding their savings. A time will come when consumers start to feel more confident about broader economic conditions and ultimately open up their wallets, putting some of those saved-up funds to use. Economists often underestimate the strength of an economic recovery for several reasons, but chief among these reasons is that identifying when (and if) pent-up demand will materialize is difficult precisely because it can be influenced by subtle changes in consumer sentiment. Whether that happens in this business cycle...well stay tuned to find out.
07-31-2009 4:23 PM