A True look from the Federation of Independet Business; not growing

  1. dutchman1951 profile image60
    dutchman1951posted 7 years ago

    Where is the Economy Going? It is not Growing, not producing recovery, we are worse off now than before. The report is below.

    Most people instinctively feel the economy is not
    doing well. They see the near 10% unemployment
    rate, lackluster business results, mixed stock market
    returns and other indicators. What do the coming
    months hold for the economy?

    Let’s take a look at the recent past:

    Consumer confidence /demand / Total demand is low.
    The average American balance sheet is much worse
    now than it was just 3 years ago.  Their investment
    portfolio is perhaps 20% lower than it was. Their
    home may be worth 20% less on average than it was
    4 years ago. They may have a job that is insecure with
    uncertain salary growth, or they may be unemployed. 
    Their net worth is lower, and their debt is a higher
    proportion of their assets, (or they may be a net
    debtor). Of course, they are trying to rebuild their
    balance sheets, primarily by being very cautious
    spenders.

    For businesses, since the beginning of the recession
    in Q4 of 2008, which began with a huge shock to the
    system, business performance has tread water for the
    most part.  GDP has barely returned to its’ 2007
    level*. Most businesses are performing modestly at
    best, with very modest growth levels since 2008 on
    average. A recent survey by the NFIB** showed most
    of their indicators at neutral or negative readings.
    Most other business forecasting indices are not much
    better. Most business balance sheets have
    deteriorated along with their earnings since 2008.

    Credit/Capital markets have not returned to normal.
    Some businesses are having trouble raising capital. 
    Small businesses and especially new businesses are
    reporting a much harder time getting funds. But even
    given this, many businesses report they don’t want to
    borrow funds, as they do not have adequate
    demand/revenue to justify and pay them back. 

    Of course the Fed has flooded the banking system
    with funds through low/zero interest rate borrowing to
    the banks. And the federal government has spent
    billions through the stimulus package. Of course,
    besides this being good for the banks themselves,
    this has really only trickled down to large businesses,
    if any. The stimulus funds have been primarily used to
    keep state and local governments going, which may
    be better than the alternative, but has done close to
    nothing to advance investment in business.

    Given this, what do the coming months hold?

    I predict very low positive growth over the coming
    months, with GDP in the 1 or 2% range through the
    rest of 2010. This will slowly build to a more robust
    recovery in 2011. The stock market will grow by a few
    percent the rest of this year.  Unemployment will slowly
    edge down, ending the year close to 9.0%, not
    returning to more normal levels (6-7%) until the end of
    2011 or 2012.  Of course, the federal budget deficit is
    increasing at an alarming pace. Given current
    deflationary pressures, I don’t believe it’s a huge
    problem now, but government inflows/outflows will
    need to be brought closer in line as the country comes
    out of recession or that will jeopardize any recovery in
    the future. 

    _________________________________________

    * In all of 2009, nominal GDP was essentially zero,
    although it rose to 5.7% in Q4. It decelerated in Q1
    2010 to 2.7%, and the forecast for the remainder of
    2010 is lower.
    Nominal US GDP declined 1.9% in 2008, the biggest
    decline since 1946. It had previously risen 2.1% in
    2007, which was already anemic.

    ** National Federation of Independent Business 


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    _________________________________________

  2. Flightkeeper profile image70
    Flightkeeperposted 7 years ago

    Shhhh! Dutchman, why are you trying to spoil Obama's illusion?

    big_smile

 
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