I recently attended two economic forecast presentations that gave different sets of views on how—and how much—the economy will grow this year. Both were very interesting and provided lots of information, trends and predictions, but they were also different in some areas of emphasis and their level of optimism.
At the first event, hosted by Moss-Adams and Union Bank in San Francisco, Kei Matsuda, the chief economist at Union Bank, said he thinks that the growth rate for U.S. GDP will be 2.4 percent in 2011. At the second presentation, hosted by Comerica in Santa Clara, Mario Belotti from Santa Clara University and Rich Karlgaard from Forbes both think it will be 3.5–4.0 percent.
Karlgaard said that even though this sounds aggressive, the International Monetary Fund was predicting that it would be 1.5 percent as little as three months ago. He thinks that the recovery will be uneven, with certain industries, for example the tech market, growing much faster than others. He believes the IPO market will be up and VC spending will certainly exceed last year’s levels. He also predicted that the Dow would hit 14,000 and the S&P would be at 1,500. Then he said that oil may go to $100 per barrel, so I’m wondering how this rate of growth would be possible, with a brake on growth like $100 per barrel of oil?
The Union Bank economist reasoned was that the recovery seems to be moving in the right direction, but very slowly. Matsuda had three take-away points that summarized his remarks:
- The “new normal” is not necessarily so. What happened in 2009 and 2010 is part of an economic cycle; corporate profits are up, and job growth is starting to return, although some jobs will not return.
- Economic growth will accelerate in 2011, although there are factors that will slow this down, such as the European debt crisis, a weakened commercial real estate market and struggling state finances.
- The housing market will stabilize with weak building starts but historically low interest rates.
In general, it seems that there is room to be cautiously optimistic, but we all need to get used to the fact that the world as we know it will continue to change and evolve, whether we like it or not. All you can do is stay flexible, be informed and look for opportunities.
