The U.S. economy will emerge from recession by growing more than 2 percent in the current and fourth quarters on a dramatic reversal in inventories, but growth next year will be tepid, a UCLA Anderson Forecast said on Wednesday…”The structural problem facing the economy is that you have wealth-impaired consumers that need to repair balance sheets and many need to repair balance sheets because they are facing retirement or education costs for children with less than they thought they had,” said David Shulman, a senior economist at the UCLA Anderson Forecast group.
So…looks like the economic forecasters – who never get it right except when they can follow an existing trend – are looking for the “new normal” to be about 2% rather than the 1 to 2% (average, say…1.5%) called for by the PIMCO guys and yet, far less than the 3 to 3.5% of the last few years. Let’s see, what has to change from last quarter? In rough figures, without government stimulus spending, we would have printed a -6% annualized growth rate for 2nd quarter. So, now the remaining government stimulus spending along with the inventory swing is supposed to kick us into the 2% growth level for the next 2 quarters. Inventory building in anticipation of a yet-to-come consumer spending rebound and continuing government spending. The government has no inclination to stop spending but will that spending result in a healthy consumer? A consumer who can eventually take the place of the government spending? You be the judge – but it’s certainly not a slam dunk for the consumer to bounce back the way it’s being anticipated.
