Economix: Weak Stocks, Weak Economy?

Amidst the sell-off on Monday and the calmer waters this morning, here’s a thought from Ian Shepherdson, chief United States economist at the High Frequency Economics research firm: a weak stock market is not always a sign of a weak economy.

Remember Black Monday, 1987? By that October day, stocks had fallen 36 percent from their peak in August. Yet in 1988, the economy grew by 4.1 percent, even though the market had recovered only half its losses.

Admittedly, aside from the stock market slide, signs are not exactly great right now for the economy. But Mr. Shepherdson is taking heart from the 4.8 percent increase in chain store sales reported by Redbook Research during the first week of August compared with a year earlier.

Consumer confidence reports have been dismal recently, but Mr. Shepherdson points out that when you ask people “‘how do you feel, they say ‘miserable.’ But that doesn’t necessarily mean you don’t go shopping.”

So maybe that’s something to get a few of those traders to take their heads out of their hands.

Article source: http://feeds.nytimes.com/click.phdo?i=73b686e751f00bec428e1d5e9b818289