Nation's Outlook: A Time of Uncertainty and Introspection

By Malehorn, Jack | The Journal of Business Forecasting Methods & Systems, Summer 2002 | Go to article overview

Nation's Outlook: A Time of Uncertainty and Introspection


Malehorn, Jack, The Journal of Business Forecasting Methods & Systems


ECONOMY IS STAGGERING MOMENTARILY BUT IS DESTINED TO CONTINUE ADVANCING

Much like a prizefighter, the economy has been stung by a series of hard blows, but it will rebound off of the ropes. Despite a loss of momentum, the Consensus calls for a steady, albeit subdued progression in its early phase of recovery. Noteworthy to the trials and tribulations of business/economic cycles is the unusual sequence of events rattling the economy such as the everpresent fear of terrorism and the unrest in the Middle East. Add to this, the ripple in the stock markets fueled in part by the recent news of unethical behavior of some corporate executives and it seems understandable that the economy would hesitate somewhat. While these events impact all of the world economies, it is not anticipated by the Consensus to derail the recovery. Instead, it is a factor to watch, to study and to prepare for. Ray Perryman from the Perryman Group sums up the situation well, "Although the rapid growth in recent months is due largely to special factors and statistical anomalies, there is sufficient momentum in the economy for a fully sustained recovery. Early signs of resurgence in technology sectors and emerging growth in other parts of the world bode well for the near-term horizon." In real terms, the Consensus expects the economy - measured by real Gross Domestic Product - to grow at a rate slightly below 3 percent through next year.

CONSUMER MARKETS

The impact of household buying can never be overemphasized especially during a recovery period. The Consensus calls for a growth of 4.1 % in Personal Consumption Expenditures over the forecast period. This mirrors an expected growth in Personal Disposable Income of 4.3%, which represents a commendable rate in any recovery. Finally, part of the mind set surrounding household purchasing is reflected in Total Light Vehicle Sales of 17 million units during the projected time horizon.

UNEMPLOYMENT

Labor markets both directly and indirectly provides ample evidence as to the state and direction of the economy. Unemployment is expected to decline moderately throughout the forecast period to roughly 5.4% by this time next year. The availability of a skilled workforce positioned in viable regional economies strongly supports the anticipated scenario

INFLATION

A look at the real Consumer Price Index (CPI) provides a glimpse of the economy's ability to sustain a positive growth without triggering inflationary pressures. According to the Consensus, CPI is expected to increase at roughly 2% during the forecast period.

INDUSTRIAL SECTOR

The Consensus is expecting real Nonresidential Fixed Investment to increase at roughly 6.7%. In concert, industrial capacity utilization will reach 77.8% during the forecast period.

FINANCIAL MARKETS

The Consensus expects the Fed to continue its role in support of the recovery by providing ample liquidity. …

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