Thursday, January 03, 2008

Predicting a not so Happy New Year

Part of economics is making predictions of the future. To do this, we use indicators. One such indicator is the Arizona Business Conditions Index, produced by ASU. It's not looking good.

A key barometer of Arizona economic activity fell in December, suggesting that a recession is likely later this year.

The monthly Arizona Business Conditions Index, produced by Arizona State University, fell below the critical 50 mark, to 47.3.

Anything below 50 indicates the economy is slowing and a recession is likely in four to six months, Dawn McLaren, research economist at ASU's W.P. Carey School of Business, said Wednesday.

Go here for the actual press release and data.

The part that concerns me is this.

Of businesses surveyed, 45 percent said they expect to spend less on capital expenditures in 2008 compared with last year, and 33 percent expect to spend more.

Capital spending drives both job creation and productivity which in turn drives our standard of living.

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