Deloitte Sees Stronger than Expected U.S. Economic Recovery

Delloitte’s Chief Economist Carl Steidtmann predicts a stronger than generally expected recovery in the US.

“A steep yield curve, compressed risk spreads, and a rising stock market are all consistent with this view,” he writes in Deloitte’s latest Global Economic Outlook. “The strength of that recovery will come from business investment, government spending, and exports to foreign consumers.”

“During the Great Depression, British economist A.C. Pigou argued that many of the government efforts to revive the economy were misdirected and were actually making matters worse. Pigou felt that the natural forces of the business cycle would bring the economy back. Falling prices would give consumers and businesses increased purchasing power while the need to rebuild inventories would add to aggregate demand.”

“We will get a real test of Pigou’s theory in the months ahead. Despite massive government spending the consensus forecast still sees sluggish growth ahead. Both consumer and business sentiment remain muted.”

If Pigou is right, we should see a much stronger than expected economic recovery over the next 12 to 18 months.

However, Steidtman also lists five reasons to worry that recovery could be short-circuited:

1: Oil prices are rising.

2: Mortgage foreclosures and bankruptcy continue to rise.

3: Bank deleveraging continues.

4: Commercial real estate delinquencies rise.

5: Inflation risk is growing.

Comments

[Dave Wrixon:]

Remind me not to read this guys advice!

Oct 29 04:50 PM

[Gary A:]

This guy just made the case for why there won't be a robust recovery.

1: Oil prices are rising.

2: Mortgage foreclosures and bankruptcy continue to rise.

3: Bank deleveraging continues.

4: Commercial real estate delinquencies rise.

5: Inflation risk is growing.

Oct 29 06:48 PM

[The Geoffster:]

It's good to hear you can borrow your way to posterity. I've been misinformed all my life.

Oct 29 10:15 PM

[The Geoffster:]

I meant prosperity but posterity does equally well.


On Oct 29 10:15 PM The Geoffster wrote:

> It's good to hear you can borrow your way to posterity. I've been
> misinformed all my life.

Oct 29 10:15 PM