Economist: “No recession, no recovery” for U.S. economy

Economist: “No recession, no recovery” for U.S. economy

Economist: “No recession, no recovery” for U.S. economy

The state of the U.S. economy can be summed up as “no recession, no recovery,” with growth averaging about 1 percent through the first half of 2009, according to Ed Hyman, chairman of independent research firm International Strategy & Investments.
   Global growth will also slow to 2 percent, the economist predicted during a keynote speech at the Wolfe Research Transportation Conference in New York last week.
   The G-7 countries, which comprise 70 percent of global economic activity, are projected to grow 1 percent in the coming year, with Europe expected to post 1 percent growth too because it is not getting any lift from trade as is the United States. Emerging economies, which have been the real engines for growth in recent years, will slow down to the 4 percent to 5 percent growth range from high single-digit rates of expansion, Hyman said.
   Overall, the U.S. economy will slow down less relative to the rest of the world, he said.
   Hyman attributed the soft landing in the United States to the fact that interest rates and oil are not going up at the same time, as they did in the 1970s and other recessions. Housing prices will continue to go down in 2009 and continue to act as a wet blanket on the economy, he said. Unemployment is likely to reach 6 percent by January, he predicted.
   In an interview with the Financial Times Tuesday, former Federal Reserve Chairman Alan Greenspan said signs are still weighted towards recession in the United States, despite recent good news on the job front and business activity. But he said the risk of a severe recession has diminished considerably in recent months.
   The global economic slowdown should eventually cool off rising oil prices, Hyman said.
   “I think a year from now oil will be $85 per barrel and five years from now it will be $150 to $200 per barrel,” he said. Goldman Sachs recently predicted oil could rise to between $150 and $200 per barrel within two years.
   Hyman also forecast the dollar would strengthen against the euro and British pound as oil prices recede, which will allow the European Central Bank to ease interest rates and further bolster the dollar.
   As the world economy slows down, countries like China will end up with overcapacity in their overall infrastructure, and will curtail their spending booms as well.
   Transportation consultant Satish Jindel disagreed in an interview that oil would significantly drop below its current level of $132 per barrel unless the dollar is much stronger. Jindel, who acknowledged he is not an economist by training, said it would be hard for the dollar to gain value if the economy is not healthier.
   “There would have to be a noticeable decline in U.S. consumption for oil to come down,” he noted.
   Hyman based his oil forecast on the premise that the global slowdown will decrease oil consumption in places such as India and China, and prices will react to the reduced demand. ' Eric Kulisch