Judging from the Q1 results of corporate America it appears that the United States of America's economy is still moving along a pretty good clip. Especially considering the massive yet to the auto industry and the housing boom slowdown in Q4 of 2005. The Fed has tickled her row with the idea of stopping its incremental interest rate hikes, however with the Q1 results of corporate America in 2006 it does not appear to be necessary yet. However some argue that with oil prices high and oil barrel prices sure to go higher is soon as the 2006 Atlantic tropical hurricane season starts due to possible disruptions in Gulf Coast oil refinery capacity. In Q2 of 2006 after the high oil prices and gasoline prices start taking its toll on economy we may see an economic slowdown, as many sectors such as retail will be hit hard by the high fuel prices. If all the money of the average family and all their spend able cash flow goes towards higher gasoline prices they will be able to make less purchases in this will definitely affect the Q2 2006 results in a sector. Additionally high transportation costs in diesel fuel and jet fuel will also take their toll on the travel industry and all other businesses, as the trucking companies and the airlines will raise their prices in order to cover their costs. And whereas the transportation companies will be able to hedge against the higher diesel prices, these higher costs will be similar to a tax on the overall economy. We must consider all this in 2006. |
