General Electric (NYSE:GE) CEO Says Economic Recovery Will Come from Business, Not Consumers
Wednesday, April 28th, 2010
With American consumers still largely sitting on the sidelines, General Electric (NYSE:GE) CEO Jeffrey Immelt said the economic recovery in the U.S. will be driven by investment made by business rather than consumer spending.
Immelt cites the cash businesses have available after a solid quarter of earnings.
It seems the implication form Immelt is the recovery will take some time, and it'll take awhile for consumers to get back on their feet and have confidence in increasing spending.
That means if there is a sustainable recovery businesses will have to spend money for it to go forward.
For a conglomerate like GE this makes sense, because they can always rely on China and other emerging markets to acquire their products. On the other hand, for companies that don't have a strong international presence, it's hard to see what it is they're going to invest in to drive revenue and profits.
If the American consumer isn't spending, then what do you target spending on if you're a business? Replenishment for the most part is pretty much accomplished, so there would have to be signs of spending somewhere for companies to commit the type of capital to the degree that it would generate a stronger recovery.
Again, for GE this will work because of the markets they serve and the estimated $25 billion in cash they'll have to invest at the end of 2010.
Similar companies should also do well, although those serving the European market in any significant manner will probably take some big hits - both in the short and the long term.
The problem with the assertion by Immelt is it was long on generalities and positive spin, but short on specifics of how that was going to work out.
But I agree with him on this, if there is going to be a sustainable economic recovery in the U.S., it isn't going to come from the American consumer.
I for one, will wait to see if this is in fact how it plays out, as companies are still watching the markets closely, and there is little to suggest anything is happening which will have any significant impact in the immediate future.
Article by Gary B
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
Tags: economic recovery , general electric , jeffrey immelt , recession , us business
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