The U.S. Economic Outlook

The U. S. Economic Outlook – Recently I attended a breakfast seminar hosted by Wells Fargo where Jay Bryson and Don Jud, PHD – Global Economist were speaking on the Economic Outlook, following is my take on the seminar:
• Everyone fell off the same cliff on September 15, 2008
• The global economy is experiencing its worst recession in decades
• Net Worth dropped 13 trillion dollars – the economy now has a whole new Balance Sheet – the decline in household net worth over the past year has been unprecedented
• The worse for the U.S. economy probably behind us
• Predictions is that the economy will start to pull out of the recession at the end of 2010
• Past recessions historically have run about 14 months in cycle – this recession will run longer than 14 months
• An economy that grows saves – money in bank earns interest producing more money for banks to loan to businesses and individuals – problem now is that banks are not loaning money
• Growth in consumer spending should remain sluggish for the foreseeable future
• The consumer sector debt loan is large
• Construction industry is in a Depression
• Housing has been hit hard – home prices decline will likely continue into 2010
• Manufacturing has been hit hard
• Manufacturing sector is expanding due to the collapse in inventory for the first part of 2009 – instead of buying more inventory, businesses used what was on hand, depleting stockpile, therefore they must now purchase more inventory which will increase spending
• Purchase of inventory should boost growth over the next few quarters
• Expected that unemployment will top 11% and not reach back to 5% anytime soon.
• The unemployment rate in our area currently exceeds the national average
• Non residential construction is a lagging indicator, this will take some time to bounce back – likely will contract through most of 2010
• Commercial real estate property prices are down 25% - financing is tough and this industry could stay back into a recession after other industry is pulling out
• Write – downs related to commercial real estate represents a downside risk to the U.S. Economy
• Commercial real estate will remain a problem until the employment growth increases – businesses do not need office space if they are not hiring back employees
• It appears that stronger growth in the rest of the world is lifting U.S. exports again
• The risk of deflation exceeds the risk of inflation over the next year or two
• The credit crunch caused the U.S. economy to enter its deepest recession in decades.
• A gradual recovery seems to be happening, but business conditions likely will remain challenging for the next few years
• Growth in foreign economies also fell into deep recessions, but appears to be returning
• Interest rates will likely maintain steady in near future