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Economist predicts return to growth in 2011

Post Time:Sep 30,2009Classify:Industry NewsView:95

Jeff Dietrich, senior analyst, Institute for Trend Research, Concord, N.H., offered his take on the economy and what's in the pipeline in his presentation, The Future is Your Decision, on the opening day of GlassBuild America: The Glass, Window & Door Expo, Sept. 30-Oct. 2 in Atlanta.

"There continues to be fear, uncertainty and anxiety about the economy," Dietrich said. "There’s certainly more awareness about what is going on and more interest. This is the longest, steepest recession since World War II."

Industrial production has not yet reached bottom, Dietrich said. “Consumer and business-to-business spending remain sluggish," he said."Investors are returning to the stock market with guarded optimism. Credit remains tight.Banks are not in a mood to take risks. The question on everyone’s mind is, ‘What are the prospects for a full recovery?’” Dietrich emphasized that encouraging signs by critical leading indicators suggest that an overall recovery for the U.S. economy is already underway and will take shape in 2010.The U.S. Composite Leading Indicator, the Purchasing Managers Index, the stock market, housing starts and corporate bond yields have all reversed direction and are gathering momentum.Retail sales and new orders should also change course in the near term.“What does this mean for glaziers?” asked Dietrich.“The nonresidential sector lags the overall economy by about a year.On commercial and office building construction, 2010 will be down versus 2009.Hospital construction, assisted living facilities and some segments of higher education will be flat to up slightly next year.“For companies that have cash and business in the pipeline, 2010 will be a year to expand," Dietrich said."Hire quality personnel, increase space, purchase equipment, judiciously increase new products and services, and consider expanding into new markets.For businesses feeling the impact of the recession already, 2010 will mean keeping fixed and variable expenses at a minimum.Re-negotiate leases and labor contracts. Watch your balance sheets carefully.Reduce inventory and conserve cash.”

For the overall economy in general, and for non-residential construction specifically, 2010 will be a year of transition or slow recovery, Dietrich said."Our forecast for 2011 is a return to growth.”

However, the fed has a big role to play in the recovery, Dietrich said. The federal reserve has made available $8.5 trillion up until now through the stimulus, cash for clunkers programs and mortgage dollars, among other efforts. "And there is danger that we can’t stop this money from flooding back in the economy, maybe causing inflation," he said. " The fed can make some decisions in the next 18-24 months that could be costly to the recovery process."

President Obama’s 10-year deficit projections arebased on a 3.4 percent growth rate in 2010 and 6.2 percent in 2012, Dietrich added. If that doesn't go per expectations, "we expect inflation will come back and there will be a weak dollar."

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