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Why The Slowing Economy May Not Matter – Yet – Seeking Alpha

The talk about the economy reaching “escape velocity” has turned out to be just another case of Wall Street hype, fortified by a low-volume, four-month moonshine rally in the stock market. But there is a silver lining to all of this, namely that the milder rate of acceleration in the first quarter of 2012 means that there is a good chance there will be a milder slowdown in the second and third quarters.

Last year saw an inventory accumulation episode come to a more abrupt end than it might have otherwise experienced, when the Japanese tsunami hit and severely disrupted the global supply chain, not to mention life and death in Japan. A slowdown was due anyway as inventory levels had refilled, but the supply chain shock made the data dip below trend and incited fears of a double-dip recession.

This year, we are due for another slowdown from the fourth- and first-quarter inventory accumulation, but we aren’t dealing with the tsunami this time. The European problems are still there, and China is slowing, so there is as yet risk to the global economy and from the attendant headlines, but while a slowing China will probably prove to be of more import to the economy than the tsunami, it should hopefully unfold more slowly and give us more time to adjust.

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