Moving from recession to recovery: What can we really expect?


CHICAGO – Oct. 16, 2009 – “One year later, the National Association for Business Economics (NABE) group is calmer but hardly happy,” says Diane Swonk, chief economist of Mesirow Financial. “Talk of a depression has been replaced with debate over the strength of the recovery. The economy looks like it bottomed around July, and is growing at a little more than 3 percent in the second half of 2009. No one, however, is popping champagne corks. The crisis took years – if not decades – to create and will take more than a few quarters of growth to fix.”

Swonk says that financial markets have improved. “The supply of credit, however, remains incredibly inhibited,” she adds. “This is to say nothing of the secondary tightening of credit that is likely to emerge as cyclical defaults and bankruptcies take their toll on the banking system in 2010.”

NABE’s 51st annual meeting concluded on Oct. 13, 2009. According to the 2009 NABE Consensus:

• Over 80 percent of NABE’s forecast panel believes that the “Great Recession” has ended and that the economy is now in the early stages of a recovery. Growth is forecast to increase at an average rate of 3 percent in 2010.

• Employment is not expected to exceed previous highs until 2012 or later.

• Inflation is expected to remain tame through the end of 2010, inhibited by high unemployment and a large amount of slack.

• The dollar is expected to further soften but not lose its status as a reserve currency.

• Corporate profits are expected to bounce back and the NABE group is uniformly optimistic that the broader stock indices will continue to rally.

• The availability of credit (or lack thereof) remains the primary risk to the outlook in the near-term.

• Concerns span the spectrum from a secondary round of credit tightening associated with the sharp rise in unemployment and accompanying defaults, to the losses that banks will have to absorb as commercial construction crashes.

• The Federal Open Market Committee (FOMC) will reverse course and raise rates by mid-2010.

© 2009 Florida Realtors®