More than 40% of the 2.5% growth in first quarter GDP was supported by growing inventories -- not final sales of goods and services. Overall, final demand is advancing at a pace that will support subpar growth of about 2% -- perhaps less -- for the balance of the year.
U.S. corporations are reporting weak sales growth, even as profits advance, but the cost cutting necessary to accomplish that dichotomy will result in continued slow hiring and perhaps a wave of layoffs. Weakening conditions in Europe make layoffs more likely, and the danger that Southern Europe's severe recession could spread north to Germany and across the Atlantic to the U.S. and Canada is quite real.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.