NABE: Economy Will Get Worse

There's good news and bad news about the economy in yesterday's survey from the National Association of Business Economics.

First the bad: 2009 is going to be a tough year all the way through. Economic growth is expected to drop by 0.9 percent in 2009 as the current recession isn't expected to end until the middle of the year. Economists are "decidedly more pessimistic on the economic outlook for the next several quarters" thanks to tight credit conditions, falling home and stock prices, and the fearful consumer. Bottom line: "While a few reports offer some glimmer of hope, a meaningful recovery is not expected to take hold until next year." But 2010 looks better. "The good news is that economic activity is expected to turn up in the second half of the year and 2010 is expected to see modestly above-trend growth of 3.1%," the group says. The survey was taken between Jan. 29 and Feb. 12.

Highlights from the NABE below:

• The NABE panel is expecting the recession to continue through mid-year 2009, with large declines in real GDP during each of this year’s first two quarters. Cumulatively, the cyclical downturn will rival that of 1973-75.
• Economic weakness will be dominated by a retrenchment in consumer spending reflecting large employment and wealth losses.
• Business investment will experience an exaggerated cyclical decline characteristic of economic downturns
• Real government spending is expected to advance a robust 2.8% in an otherwise grim 2009
• The consumer price index is projected to decline 0.8% in 2009, as already large commodity price declines pass through to consumer prices.
• The jobless rate will peak at 9.0% by the end of the year. House prices are predicted to decline 5% during 2009, though the S&P 500 index is expected to rise a solid 8% by December 31, 2009.

Comments

[joshuaodonnell:]

Guess what? Not gonna happen. We are going into a depression. The NABE has no idea what there talking about. There all just predictions.... and unfortunately they are all wrong.

I believe we are entering into a "lost decade", very similar to what the Japense went through in the 90's. It will not be pretty. As the "baby boomers" beging to retire and cash out on there investments we will see a huge downturn in the economy. The DOW will most likely crash to 4000-5000 levels. Will see double digit unemployment by end of year or beginning of next year. This isn't doom and gloom guys, its reality. I

I do however believe we will see a very short term bounce from the stimulus, but nothing that will create long term economic growth. (basically it wont work long term, but will short term) As the demographics change will see huge changes in the way people spend money. Everything will be different by 2010.

Feb 24 04:20 AM

[Mad Hedge F...:]

The forecasting firm Macroeconomic Advisors says that we are going through the “epicenter” of the recession right now. They see Q4 GDP being revised down from -3.8% to -6.0%, and that Q1 will come in at -5%. These numbers fall somewhere in between the 1974 recession and the Great Depression in terms of their severity, and are double the worst case scenario offered only three months ago. A tsunami of infrastructure spending, stimulus, and newly recapitalized bank lending will bring positive growth of 2% in the second half. Lower interest rates are slowing down the home foreclosure rate. Many states and municipalities, like Denver, started shovel ready projects the very second that Obama signed the stimulus bill, but it will take months to see the impact on the data. In layman’s terms, thing are about to get a lot worse, then a lot better pretty quickly, giving us a classic “V” type bottom for the economy.

Feb 24 05:41 PM